The Australian bonds market closed mixed, partially bouncing back after an overnight rally caused by border conflicts on the Korean peninsula.
At 1630 AEDT on the ASX 24, the December 10-year bond futures contract was at 94.520 (implying a yield of 5.480 per cent),up from Tuesday's close at 94.510 (5.490 per cent).
The December three-year bond futures contract was at 94.830 (5.170 per cent), down from 94.840 (5.160 per cent).
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Australian bonds began the day firmer after an overnight rally in US Treasuries amid the threat of further conflict on the Korean peninsula and continued uncertainty in the Eurozone sovereign debt.
South Korea and the United States will start a naval exercise on Sunday involving a US aircraft carrier, after North Korea launched an artillery attack on a border island, killing two South Korean soldiers.
Deutsche Bank fixed income strategist David Plank said the overnight rally was followed by a sell-off in the local session.
"The sell off really reflects the movement in Treasuries, the US market has sold off modestly throughout the course of the day, partly in response to headlines about China and Russia bypassing the US dollar in some of their trades," he said.
The Russian government announced that the Chinese yuan would soon start trading in Russia as the countries seek to challenge the US dollar and promote the use of national currencies.
Mr Plank said European debt worries, tensions on the Korean peninsula and US data would continue to be the major drivers for bond markets.
The US will release a raft of data on Wednesday night, including initial jobless claims, new home sales and the University of Michigan consumer confidence index.
