Australia Markets closed

Sell off continues in 3yr Aust bonds

Australian three-year bond futures prices have fallen following a selloff in US Treasuries.

RBC Capital Markets fixed income strategist Michael Turner said the US Treasury yields rose overnight after legislation preventing a fiscal cliff of automatic tax hikes and spending cuts passed through the US Congress.

He said the sell off in US Treasuries put further pressure on Australian bond futures, which had already fallen sharply on Wednesday in response to the fiscal cliff deal between US Democrats and Republicans.

"We had a fairly big sell off yesterday while the US was closed and we've weakened a little further following that sell off in Treasuries," he sais.

Mr Turner said the focus of the Australian bond market was now likely to shift to local events, especially any signs of the Reserve Bank of Australia's intentions for monetary policy in 2013.

The RBA cut the cash rate by a quarter of a percentage points to three per cent in December, and has cut the rate by 1.75 per cent since November 2011.

At 0830 AEDT on Thursday, the March 10-year bond futures contract was trading at 96.620 (implying a yield of 3.380 per cent), up slightly from 96.615 (3.385 per cent) on Monday.

The March three-year bond futures contract was at 97.180 (2.820 per cent), down from 97.200 (2.800 per cent) previously.