Aust bonds higher after on US data

Australian bond futures prices have rallied on the back of disappointing US manufacturing data.

UBS interest rate strategist Matthew Johnson said bond futures rallied on Thursday night (Australian time) after it was reported that the Philadelphia Federal Reserve manufacturing index fell in June for a second straight month.

It was also reported that number of people applying for unemployment benefits in the US in May reached an almost seven-month high and that sales of existing homes fell.

"There was a strong rally overnight on the weak US data, Australia outperformed in that but it hasn't been able to continue," Mr Johnson said.

At 1630 AEST on Friday, the September 10-year bond futures contract was trading at 96.950 (implying a yield of 3.050 per cent), up from 96.870 (3.130 per cent) on Thursday.

The September three-year bond futures contract was at 97.600 (2.400 per cent), up from 97.500 (2.500 per cent).

Mr Johnson said bond traders were likely to behave cautiously over the next fortnight as they waited for the outcome of the upcoming summit of EU leaders and the release of monthly US non-farm payroll data.

"We're sort of awaiting information, so I think (the market) it will be fairly range-bound trading."

Non-farm payroll data on June 1 showed only 69,000 jobs were created in the US in May, not enough to keep up with population growth.

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