The previous day's data on U.S. jobless claims, retail sales and services activity boosted hopes of faster job growth ahead of the January payroll figures, keeping the market on the defensive.

The January jobs data was eyed to set the near-term if not the longer-term direction for the debt market.

The median of forecasts from analysts polled by Reuters is for employers to have added 145,000 jobs in January after adding 103,000 jobs in December. They also expect the jobless rate to have edged up to 9.5 percent from 9.4 percent.

This week's upbeat data has raised expectations that the payroll increase could easily beat forecasts and confirm the notion of self-sustaining U.S. economic growth, which could affect participants' expectations towards the duration of the Federal Reserve's easy monetary policy.

The Fed's loose or quantitative easing policy, dubbed QE2, is scheduled to run until June and a robust jobs number could throw doubt on prospects of the central bank extending the policy put in place to support the economy.

The two-year note yield, sensitive to changes in monetary policy expectations, has risen about 17 basis points this week amid inflation concerns and was on track to post its biggest weekly rise in over a year. It yielded 0.72 percent, little changed from late U.S. trade on Thursday.

"The two-year yield could near 1.0 percent if the Fed ends QE2. For now it could climb towards 0.8 percent if jobs added in January top 200,000," Naka Matsuzawa, chief strategist at Nomura Securities, said in a note to clients.

The benchmark 10-year note shed 5/32 in price to yield around 3.57 percent, up about 1.5 basis points and the highest since May.