The Australian bond market is weaker after the Reserve Bank said the inflation rate will peak above its target range in the coming years.
The bank aims to keep inflation between two to three per cent, and if the rate stays high then the RBA would increase the cash rate.
JP Morgan interest rate strategist Sally Auld said bond markets have weakened over the past few days and that continued after the RBA released its forecast.
"We saw a little bit of that today with the RBA's statement where they revised up their inflation forecasts," she said.
"I think everyone knew that was going to happen to the near term forecasts but they revised them up over the forecast horizon.
"The initial reaction was for the bond market to sell on those headlines."
At 1630 AEDT on Friday, the March 2014 10-year bond futures contract was trading at 95.900 (implying a yield of 4.100 per cent), down from 95.970 (4.030 per cent) on Thursday.
The March 2014 three-year bond futures contract was at 96.960 (3.040 per cent), down from 97.010 (2.990 per cent).
Ms Auld said trade was quiet ahead of the release of key US jobs figures.
Non-farm payrolls data for January is due out early on Saturday morning, Australian time, and the market is expecting an employment gain of 180,000 and an unemployment rate of 6.7 per cent in January.
"We had a soft number the month before and everyone is expecting a decent rebound," Ms Auld said.
"If we don't get that, then watch out, all the weakness we've seen in bond markets in the last couple of sessions will be well and truly recovered, plus some."