Australian bond futures prices have fallen after investor sentiment in Europe improved overnight.
It was a positive night on global equity markets, which caused a sell-off in bonds, RBC Capital Markets fixed income strategist Michael Turner said.
"We were a bit weaker overnight, there was a bit of positive sentiment out of Europe," he said.
Stock markets in Europe rallied on news of a sharp rebound in German business confidence.
A closely watched indicator of economic sentiment rose to 6.9 points, a seven month high, from minus 15.7 in November.
Mr Turner said a successful Spanish bond auction, which saw the financially troubled nation sell an above-target 3.9 billion euros ($A4.85 billion) in debt at reduced interest rates, also had an impact on markets.
He said the local bond market was likely to trade in a narrow range for the next few days, though the rollover of futures contracts on Friday could have an impact on prices.
"We have been in a pretty tight range for over a week now, though the future's rollover on Friday might prompt some interesting moves," Mr Turner said.
At 0830 AEDT on Wednesday, the December 10-year bond futures contract was at 96.910 (implying a yield of 3.090 per cent), down from 96.955 (3.045 per cent) on Tuesday afternoon.
The December three-year bond futures contract was trading at 97.360 (2.640 per cent), down from 97.395 (2.605 per cent).