The bond market is slightly firmer ahead of the conclusion of what is expected to be a very important US Federal Reserve meeting.

Speculation is mounting that the Fed could signal an interest rate hike may happen sooner than previously expected, following a recent bout of positive economic data.

The US central bank makes an announcement early on Thursday morning, Australian time.

IG chief market strategist Chris Weston said Australian bond prices are following US Treasury bonds higher in cautious trade.

“The US bond market is at the centre of the financial world, dictating flows in every other asset class,” he said.

If the Fed maintains a stance of keeping the Federal Funds Rate at a near zero level for a considerable time, then US bonds will be bought, but if the Fed changes its stance it could be taken negatively by bond and equity markets, Mr Weston said.

At 1630 AEST on Tuesday, the December 2014 10-year bond futures contract was trading at 96.345 (implying a yield of 3.655 per cent), up from 96.315 (3.685 per cent) on Monday.

The December 2014 three-year bond futures contract was at 97.140 (2.860 per cent), up from 97.110 (2.890 per cent).