Australian bond futures prices are lower on improved US housing data and hopes the world's largest economy will avoid a `fiscal cliff' of automatic tax hikes and spending cuts.
Westpac interest rate strategist Tim Jung said there was a move away from safe haven assets like bonds overnight as stock markets in the US and Europe rallied.
He said improved housing data from the US contributed to the improved sentiment.
US home sales rose 2.1 per cent over September, the National Association of Realtors said.
Mr Jung said markets had also become more hopeful that US Republicans and Democrats will agree to a long-term deficit reduction plan, thus avoiding tax increases and spending cuts expected to push the country into recession from taking effect in January.
"We're not getting optimistic yet, but sentiment has definitely improved," he said.
Mr Jung said traders would closely watch the release of minutes from the Reserve Bank of Australia's (RBA) November board meeting on Tuesday, as well as a speech by RBA Governor Glenn Stevens.
At 0830 AEDT on Tuesday, the December 10-year bond futures contract was at 96.935 (implying a yield of 3.065 per cent), down from 96.990 (3.010 per cent) on Friday.
The December three-year bond futures contract was trading at 97.400 (2.600 per cent), down from 97.460 (2.540 per cent).