The Australian bond market is weaker after traders moved out of safe haven assets following the release of surprisingly good retail spending figures.
Retail trade grew by 0.8 per cent in September, which beat market expectations of a 0.4 per cent rise.
UBS interest rate strategist Andrew Lilley said the data sparked some optimism that the Australian economy will be in good shape when the mining investment boom ends.
"The story so far has been that the handover of growth from the mining sector to the non-mining sectors wouldn't be validated because of weak demand from consumers," he said.
"The retail sales data today put an end to that story.
"It shows a real strengthening in demand and that's what the market responded to."
At 1630 AEDT on Monday, the December 10-year bond futures contract was trading at 95.905 (implying a yield of 4.095 per cent), down from 95.975 (4.025 per cent) on Friday.
The December three-year bond futures contract was at 96.840 (3.160 per cent), down from 96.930 (3.070 per cent).
The Reserve Bank of Australia will hold its board meeting on Tuesday and is widely expected to keep the cash rate at 2.5 per cent, despite moving it five out of the last six Melbourne Cup Day meetings.
"The rates decision will be one of the only meetings that puts an end to the speculation that the RBA must move the cash rate on days when there is a horse race," Mr Lilley said."Everyone will be looking to see the RBA's inflation assessment following the upside surprise from the last inflation figures."