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Bonds lower on currency moves

Australian bond futures prices are lower on global currency moves and low liquidity.

At 1630 AEDT on Friday, the December 10-year bond futures contract was at 96.690 (implying a yield of 3.310 per cent), down from 96.770 (3.230 per cent) on Thursday.

The December three-year bond futures contract was trading at 97.185 (2.815 per cent), down from 97.260 (2.740 per cent).

Deutsche Bank bond trader Andrew Bryan said the fall was driven by a lack of liquidity in the market, rather than local or international economic concerns.

"The trend at the moment is mainly driven by currency moves, particularly the Aussie-yen cross," he said.

"There's not much liquidity in the market at the moment, so any flows are having an outsize effect."

At 1530 AEDT, the Australian dollar was trading at 88.45 Japanese yen, its highest point since March this year.

However, Mr Bryan said the market could return its focus to international issues - particularly the US fiscal cliff - next week.

"The fiscal cliff will be a point of volatility next week, but liquidity will get even scarcer as we approach the Christmas break," he said.

US leaders continue to discuss how to resolve the fiscal cliff - a series of tax rises and spending cuts due to begin in early 2013.