The Australian bond market is weaker as a flat set of US producer inflation figures make an imminent American interest rate increase look less likely.

However, futures markets still expect the US Federal Reserve to raise the key rate in 2015.

But a 0.5 per cent decline during February in the US producer price index (PPI), the prices businesses receive for their products, made bond markets think the US Fed could take its time raising rates, St George senior economist Hans Kunnen said.

“Whilst the PPI in the US was soft, a lot of that was energy related,” he said.

“There isn’t a case for rapid rate rises in the US. They might do one simply to send a signal but I don’t know it will be followed up by a lot of action. Hence, the market is relatively relaxed.”

The US Fed’s Federal Open Market Committee meets this week, with analysts eager to see if it drops the word `patient’ from an accompanying statement on a possible rate increase.

At 0830 AEDT, the March 2015 10-year bond futures contract was trading at 97.468 (implying a yield of 2.532 per cent), down from 97.490 (2.510 per cent) on Friday.

The March 2015 three-year bond futures contract was at 98.110 (1.890 per cent), down from 98.115 (1.885 per cent).


Government bond and bank bill yields:

* CGS 4.75 pct July 2017,1.874% unchanged from Friday

* CGS 2.75 pct April 2024, 2.481% unchanged

Sydney Futures Exchange prices:

* March 2015 bill futures, 97.690 unchanged

* June 2015 bill futures, 97.840 unchanged

(*Closes taken at 1630 AEDT previous local session)

Source: IRESS