Australia Markets open in 32 mins

Bonds higher ahead of capex data

Australian bond futures prices are higher ahead of a reading for capital expenditure, which is expected to influence an upcoming rate decision by the Reserve Bank of Australia (RBA).

At 0830 AEDT on Wednesday, the December 10-year bond futures contract was at 96.890 (implying a yield of 3.110 per cent), up from 96.865 (3.135 per cent) at Wednesday's close.

The December three-year bond futures contract was trading at 97.350 (2.650 per cent), up from 97.330 (2.670 per cent).

RBC Capital markets fixed-interest strategist Su-Lin Ong said capital expenditure data would be the dominating factor for bond markets on Thursday.

"Prices will probably remain slightly higher this morning, but we're really biding our time until the capex release," she said.

"That's probably the last key release going into the (central bank) board meeting next week.

"There's a lot of tension around capex, particularly following the government's report yesterday on major projects and where they're at."

The report was from the Bureau of Resources and Energy Economics (BREE), and showed that $268.4 billion of resource and energy projects have been locked in, while an additional $13.2 billion of projects had reached the committed stage.

Ms Ong said Australian bonds were looking attractive in the current market environment.

"We're down at levels that are attracting some buying," she said.

"Yields have backed up towards the top of recent ranges, so there's an increased appetite to buy at these levels.

"If we get a capex report that shows downward revisions to spending plans, that should lend more support."

At its previous meeting on November 6, the RBA kept the cash rate on hold at 3.25 per cent, after easing in May, June and October.