Australian bond future prices have risen to their highest level ever amid fears Greece’s political crisis could see it exit the euro zone.

At 0830 AEST on Tuesday, the 10-year bond futures contract was trading at 96.840, (implying a yield of 3.160 per cent), a record high, up from 96.765 (3.235 per cent) on Monday.

The June three-year bond futures contract was at 97.430 (2.570 per cent), up from 97.380 (2.620 per cent).

Earlier the contract hit a record high of 97.440 (2.560 per cent).

Westpac senior market strategist Damien McColough said bond prices had rallied as investors sought safe haven assets amid concerns Greece could exit the euro zone and default on its debt.

Stock markets in Europe and North America dropped sharply overnight after Greece’s political parties failed to form a coalition government over the weekend.

If a government cannot be formed, Greece will need to hold fresh elections next month, adding to fears it will exit the euro zone and default on its debt.

Mr McColough said it was difficult to predict how much further bond prices could rise in the current climate, given the market had already priced in more interest rate cuts than the Reserve Bank of Australia was expected to deliver.

“They keep setting record highs,” he said.

“We’re clearly at very expensive outright levels relative to RBA expectations but it doesn’t seem like the sort of market where you can establish a strong short position at the moment.”

AAP ews/gf