Australian bond future prices are higher as investors price in a possible cut to interest rates next week.
Westpac senior market strategist Damien McColough said the bond market had now priced in a 50 per cent chance that the Reserve Bank of Australia (RBA) would cut the official interest rate April 3.
"The market has detected a slight change in RBA rhetoric in the past fortnight about the role it can play in structural change," he said.
He said concerns about China's economy, including weaker-than-expected manufacturing data released last week, was driving speculation about a rate cut and pushing bond futures higher.
"The thing that really drove it was the belief in Chinese near-term weakness.
"The Chinese PMI's (manufacturing data) last week really sparked this week's rallies."
However, Mr McColough said the market was unlikely to rally further during Friday.
"I think that we will probably stay neutral from these current levels."
At 0830 AEDT on Friday, the June 10-year bond futures contract was trading at 95.960 (implying a yield of 4.040 per cent) up from 95.945 (4.055 per cent), on Thursday.
The June three-year bond futures contract was at 96.540 (3.460 per cent), up from 96.500 (3.500 per cent).