Australian bond futures prices are higher following the release of weaker-than-expected domestic inflation figures.
Figures released by the Australian Bureau of Statistics show the consumer price index (CPI) rose just 0.2 per cent in the December quarter, below economists' expectations of a 0.5 per cent rise.
Nomura head of fixed income Jon Linton said the figures made it easier for the Reserve Bank of Australia to cut the cash rate again over the coming months and, therefore increased demand for bonds.
But he said the rally in bond prices was relatively weak.
"We are about five basis points lower in yield, which is about the minimum you would expect in response to a weak CPI print," he said.
Mr Linton said the market was still not expecting the RBA to cut the cash rate from its current level of three per cent at its February 5 board meeting.
"People don't think the CPI print in itself is enough to change the RBA's mind," he said.
"The market is telling you this isn't a game changer."
Mr Linton said that, with no major pieces of local economic data due out this week, local bond futures prices would take their lead from movements in overseas markets over the next few days.
At 1630 AEDT on Wednesday, the March 10-year bond futures contract was trading at 96.730 (implying a yield of 3.270 per cent), up from Tuesday's close of 96.665 (3.335 per cent).
The March three-year bond futures contract was also higher, at 97.280 (2.720 per cent), from 97.230 (2.770 per cent).