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Aust bonds lower in quiet trade

Australian bond futures prices are slightly lower following a quiet overnight trading session.

JP Morgan interest rate strategist Sally Auld said local bond futures moved lower after European stock markets reacted positively to stronger Chinese manufacturing data released on Thursday.

HSBC's monthly Chinese Purchasing Managers' (PMI) Index rose to 50.4 in November, from 49.5 a month earlier.

It is the first time in 13 months the index has been above the key level of 50, which indicates the sector is expanding.

But Ms Auld said the overnight session had been relatively quiet due to the US Thanksgiving holiday.

She said Friday's local session was likely to remain quiet as well, but with a slight downward bias due to positive sentiment from the Chinese data.

"There isn't much out in the way of data today, so, once we find out the range, I think we will probably sit there," she said.

Ms Auld said the current move away from bond futures towards higher risk assets was likely to continue in the final weeks of 2012.

"I think, maybe, this move will gather a bit more momentum as we head into year-end because I don't think people are really positioned for it."

At 0830 AEDT on Friday, the December 10-year bond futures contract was at 96.820 (implying a yield of 3.180 per cent), down from 96.830 (3.170 per cent), on Thursday.

The December three-year bond futures contract was trading at 97.310 (2.690 per cent), down from 97.320 (2.680 per cent).