Australian bond futures prices are higher following negative news from Europe and a well subscribed local debt auction.
ANZ head of interest rate research Tony Morriss said bond futures prices moved higher overnight on Thursday amid weakness in European stock markets and disappointing economic data from the euro zone.
"We have seen a little bit of support come back into bond markets over the last day," he said.
Eurostat, the EU's statistics office, said on Thursday the euro zone economy shrank by 0.6 per cent in the final three months of 2012.
Mr Morriss said solid demand for an auction of Australian government debt on Friday also helped boost demand for bond futures.
The Australian Office of Financial Management received bids totalling $3.337 billion for $600 million worth of October 2015 Treasury bonds.
"We had a bond tender here and they saw a particularly strong bid-cover so that suggests that this recent move higher in yield has made our bonds more attractive for investors," Mr Morriss said.
Mr Morriss said bond prices are likely to consolidate around their current levels next week.
At 1630 AEDT on Friday, the March 10-year bond futures contract was trading at 96.500 (implying a yield of 3.500 per cent), up from 96.430 (3.570 per cent) on Thursday.
The March three-year bond futures contract was at 97.140 (2.860 per cent), up from 97.090 (2.910 per cent).