Australian bond futures prices are lower after Chinese data showed the country's key manufacturing sector expanded for the first time in 13 months.
HSBC's monthly Chinese Purchasing Managers' (PMI) Index rose to 50.4 in November, from 49.5 a month earlier.
It is the first time in 13 months the index has been above the key level of 50, which indicates the sector is expanding.
UBS interest rate strategist Matthew Johnson said the data boosted market sentiment and pushed local bond prices lower.
"That's a positive and its got the market thinking that better Chinese data means less need for the Reserve Bank of Australia to cut rates," he said.
Futures markets are currently pricing in a 60 per cent likelihood the RBA will cut the cash rate from its current level of 3.25 per cent at its December board meeting.
Mr Johnson said the sell-off in Australian bonds was likely to continue on Thursday night with the release of European Purchasing Managers Index (PMI) figures.
"The market is basically looking for no improvements there and my guess is things might actually be a bit better," he said.
"If that's the case bonds will remain under pressure."
At 1630 AEDT on Thursday, the December 10-year bond futures contract was at 96.830 (implying a yield of 3.170 per cent), down from 96.880 (3.120 per cent), on Wednesday.
The December three-year bond futures contract was trading at 97.320 (2.680 per cent), down from 97.380 (2.620 per cent).