Three-year bonds weaken after Fed meeting

Three-year Australian bond futures prices have fallen slightly after the US Federal Reserve (Fed) failed to announce any new economic stimulus after its policy meeting.

At 0830 AEST on Thursday, the September three-year bond futures contract was at 97.420 (2.580 per cent), down from 97.440 (2.560 per cent) on Wednesday.

The September 10-year bond futures contract was trading at 96.975 (implying a yield of 3.025 per cent), up from 96.970 (3.030 per cent).

The Fed's statement, issued after its two-day policy meeting, didn't announce any action to give the US economy a boost, saying economic growth would continue to be moderate.

There had been some expectation the US central bank would announce a third round of an economic stimulus program called quantitative easing (QE).

UBS interest rate strategist Matthew Johnson said the US Federal Reserve, basically, did the bare minimum it could.

"So, they acknowledged the growth slowdown and gave a strong indication that easing was on the way. But, the market was looking for actual easing, not prospective easing," he said.

Mr Johnson said the focus now for bond markets was very much on the outcome of the Thursday night's (AEST) European Central Bank (ECB) meeting.

The ECB is expected to discuss ways to reduce borrowing costs for debt-laden euro zone nations.

Expectations for the meeting increased last week when ECB president Mario Draghi said he would do "whatever it takes" to protect the euro from the region's debt crisis.

Mr Johnson said if the ECB disappoints, then the bond market was likely to strengthen.

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