Australian bond futures prices lost ground as encouraging manufacturing data from Germany, the US and China helped to rally world equity markets.
ANZ senior interest rate strategist Shane Lee said the boost in investor confidence led to a move away from bond futures on Thursday.
"The US data was a lot better and the Chinese data as well," he said.
"It's all looking pretty good, so there was rally on equity markets."
Mr Lee said sentiment was unaffected by weaker than expected domestic housing data.
"Although it was a bit weaker than expected, global factors are dominating at the moment so the market just took it in its stride."
Mr Lee said he expected little movement on bond markets in the lead up the February 7 decision on interest rates by the Reserve Bank of Australia.
At 1630 AEDT on Wednesday, the March 10-year bond futures contract was trading at 96.230 (implying a yield of 3.770 per cent), down from 96.270 (3.730 per cent) on Wednesday.
The March three-year bond futures contract was at 96.820 (3.180 per cent) down from 96.890 (3.110 per cent).
