The Australian bond market is slightly weaker as traders bet that an interest rate rise by the US Federal Reserve will happen sooner rather than later.

Optimism about the US economy has increased the chances that a rate hike could come as early as June and has seen bond futures prices slide and the US dollar rally.

Bank of New Zealand strategist Kymberly Martin said bonds weakened further after a speech on Friday by Federal Reserve Bank of Richmond president Jeffrey Lacker.

“He still favours a first rate hike in June as he expects recent US data weakness will prove temporary,” Ms Martin said.

“Also, when asked about the March minutes that documented several members as favouring a June hike, he said several was a pretty substantial amount.”

At 0830 AEST on Monday, the June 2015 10-year bond futures contract was trading at 97.630 (implying a yield of 2.370 per cent), down from 97.635 (2.375 per cent) on Friday.

The June 2015 three-year bond futures contract was at 97.250 (2.750 per cent), down from 98.260 (1.740 per cent).


Government bond yields:

  • CGS 4.75 pct July 2017, 1.770%, unchanged from the local Friday close

  • CGS 2.75 pct April 2024, 2.312%, unchanged

Sydney Futures Exchange prices:

  • June 2015 bill futures, 97.900 from 97.890

  • September 2015 bill futures, 98.020 from 98.010

(*Closes taken at 1630 AEST previous local session)

Source: IRESS