Bonds higher ahead of rates decision

Australian bonds have opened slightly higher as the market awaits the Reserve Bank of Australia's (RBA) interest rate decision.

At 0830 AEDT on Tuesday, the March 10-year bond futures contract was trading at 96.120 (implying a yield of 3.880 per cent), up from 96.110 (3.890 per cent) on Monday.

The March three-year bond futures contract was at 96.690 (3.310 per cent), up from 96.680 (3.320 per cent).

ANZ senior economist Shane Lee said there was little movement in the bond market ahead of the RBA's rates decision due at 1430 AEDT Tuesday.

"The curve has flattened a bit," he said.

"We saw a pretty big sell-off yesterday on the back of the US non-farm payrolls (jobs) data.

"The market was a touch stronger overnight, and the fixed income market seems to have gone sideways, waiting on what the RBA does today."

On Friday, US non-farm payrolls data showed an increase of 243,000 jobs during January.

Mr Lee said that with the RBA expected to cut rates by 25 basis points, a failure to do so could return the market to a sell-off mode.

"Their statement will be very important too, in terms of future guidance," he said.

"Funding pressures in Europe have eased a bit, but the market is really moving on the central bank decision now."

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