Australian bond futures prices are lower following improved US employment data.
Commonwealth Bank interest rate strategist Phillip Brown said local bond futures prices fell on Friday night as the US unemployment rate fell to 7.7 per cent in November.
The Labour Department figures showed superstorm Sandy, which hit the US east coast in late October, had only minimal impact on employment, with 146,000 jobs added to the economy in the month.
With few major pieces of economic data expected to be released this week, the local bond market would be driven by developments in the US budget negations, Mr Brown said.
US politicians are trying to reach an agreement on measures to reduce the country's budget deficit and avoid the so-called fiscal cliff of spending cuts and tax hikes due to apply in 2013.
"The fiscal cliff is the big thing that can move markets in one direction or another," he said.
"But if they do manage to get through these negotiations the underlying economic data is looking alright."
At 0830 AEDT on Monday, the December 10-year bond futures contract was at 96.905 (implying a yield of 3.095 per cent), down from 96.955 (3.045 per cent) on Friday.
The December three-year bond futures contract was trading at 97.340 (2.560 per cent), down from 97.400 (2.600 per cent).