Australian bond futures prices are lower following a selloff in US Treasuries.
Commonwealth Bank interest rate strategist Phillip Brown said the local futures market moved lower on Friday after the release of the minutes of the US Federal Reserve's Federal Open Markets Committee (FOMC) December policy meeting prompted a rise in US Treasury yields.
The minutes showed some of the FOMC's voting members thought the central bank's bond purchasing program, known as quantitative easing, should be slowed or stopped by the end of 2013.
"It has been a pretty strong selloff to be honest, more to do with the selloff in the US after the Fed minutes than anything else," Mr Brown said.
Mr Brown said the release of the key monthly US non-farm payrolls figures would be the major driver for bond markets on Friday night and Saturday morning (AEDT).
Meanwhile, concern about a pending battle in the US Congress over the country's debt ceiling may take the shine off a positive payrolls number, Mr Brown said.
The US has reached its debt ceiling, meaning Congress will need to increase the limit the government can borrow within about six weeks to prevent the country defaulting on its bills.
But Republicans, who control the House of Representatives, have vowed to oppose moves to lift the ceiling unless Democrats agree to spending cuts, which will have a contractionary effect on the economy.
"All the indications are the payrolls should be good, it is just a question of whether the US economy can continue to recover amid a debt ceiling fight and a backdrop of fiscal contraction," Mr Brown said.
At 1630 AEDT on Friday, the March 10-year bond futures contract was trading at 96.575 (implying a yield of 3.425 per cent), down from 96.665 (3.335 per cent) on Thursday afternoon.
The March three-year bond futures contract was at 97.150 (2.850 per cent), down from 97.230 (2.770 per cent) previously.