Australian bond futures prices are higher after a weaker domestic business investment outlook raised expectations of a December interest rate cut.
JP Morgan interest rate strategist Sally Auld said bond futures rallied overnight following the release of official capital expenditure data on Thursday, which showed a downgrade to private sector spending plans for the 2012/13 financial year.
The figures raised fears the mining investment boom may peak sooner and be lower than expected, increasing speculation that the Reserve Bank of Australia (RBA) would cut the cash rate at its December 4 board meeting.
"I think (the rally) was probably due to a bit of noise surrounding the Capex data," Ms Auld said.
"A few people have changed their calls on the RBA on the back of it and that clearly got a bit of currency in London."
But, with Asian equity markets expected to rally Friday, Ms Auld said bond futures may not move much higher during the local session.
At 0830 AEDT on Thursday, the December 10-year bond futures contract was at 96.925 (implying a yield of 3.075 per cent), up from 96.860 (3.140 per cent) on Thursday.
The December three-year bond futures contract was trading at 97.400 (2.600 per cent), up 97.330 (2.670 per cent).