Australian bond futures prices have rallied on expectations the Reserve Bank of Australia will cut the cash rate on Tuesday.
JP Morgan interest rate strategist Sally Auld said a string of weaker-than-expected economic data released on Monday increased expectations the RBA would cut the cash rate.
"The data was pretty much all one direction," she said.
She said futures markets had now priced in an 88 per cent likelihood the RBA would cut the cash rate by 25 basis points at its December board meeting on Tuesday.
Australian Bureau of Statistics figures released on Monday showed retail spending was flat in October while ANZ job ads figures showed job advertisements declined for an eight straight month in November.
Meanwhile, the Australian Industry Group performance of manufacturing index (PMI) showed the manufacturing sector contracted for the ninth straight month while the TD Inflation survey showed prices fell 0.1 per cent in the month.
Ms Auld said demand for bond prices was likely to remain strong heading into the RBA's decision.
"Clearly most people are expecting a rate cut tomorrow so the big surprise would be if they didn't go," he said.
"But if they don't go tomorrow I actually think the market is going to scratch its head and say well there is maybe a chance of a 50 point cut in February."
At 1630 AEDT on Monday, the December 10-year bond futures contract was at 96.935 (implying a yield of 3.065 per cent), up from 96.915 (3.085 per cent) on Friday afternoon.
The December three-year bond futures contract was trading at 97.420 (2.580 per cent), up from 97.380 (2.620 per cent).