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Bonds lower after US Fed meeting

Australian bond futures prices are lower after the US central bank announced it would extend its bond-buying program.

At 1630 AEDT on Thursday, the December 10-year bond futures contract was at 96.770 (implying a yield of 3.230 per cent), down from 96.855 (3.145 per cent) on Wednesday.

The December three-year bond futures contract was trading at 97.260 (2.740 per cent), down from 97.320 (2.680 per cent).

At midday on Thursday, the December 2012 90-day bank bill futures contract expired, replaced by a contract expiring in June 2013.

ANZ head of interest rate research Tony Morriss said bond prices in both the US and Australia had unexpectedly softened following the US Federal Reserve Open Market Committee meeting.

"US bonds are weaker, and that's kept our market on the back foot," he said.

"We're trying for figure out why, since the Fed has looked to extend easing, and has an easing bias."

At the conclusion of its meeting on Wednesday, the FOMC said it would continue debt-purchasing, spending $US45 billion ($A42.95 billion) a month on long-term bonds, with the goal of keeping lending rates low, and stimulating spending.

However, it said it would no longer cover the cost of the purchases through the sale of short term debt.

Mr Morriss said that in the lead up to Christmas, the only other event of market interest was the Japanese general election.

"This US QE (quantitative easing) might be followed up by QE in Japan," he said.

"So that region will be important in the near-term."

Japan will go to the polls on December 16.