Ten-year notes fell 5/32 in price to yield 3.128 percent , up around 2 basis points from late US trade on Wednesday, still below a six-week high of 3.223 percent hit last week.

"I think international accounts, real money accounts were in and selling the 10-year sector," said a trader for a US financial institution in Tokyo, adding that such selling dragged Treasuries lower at the start of Asian trade on Thursday.

Treasuries have been tracking the euro recently, but with moves in the euro relatively subdued so far on Thursday, moves in Treasuries have been limited too, the trader said.

Treasuries may come under pressure over the next few trading sessions, if US jobs data on Friday turns out to be at least in line with market expectations, he added. The median forecast is for payrolls growth of 90,000 jobs, up from 54,000 jobs in May. "If that number comes in as expected, I think we do get a sell-off ahead of supply next week," the trader said, referring to forthcoming auctions of three-year notes, 10-year notes, and 30-year bonds.

News that a small team of US Treasury officials is discussing options to stave off default if Congress fails to raise the country's borrowing limit by an Aug. 2 deadline, could offer support for Treasuries if the options are finalised, an analyst said.

Sources told Reuters that Treasury has studied issues including whether a 1985 finding by a government watchdog gives the government legal authority to prioritize payments.

"If it turns out that the Treasury does have such legal authority, that could offer the market a sense of relief," said Tomoaki Shishido, rate analyst for Nomura Securities in Tokyo.

"But at this stage such steps are only being considered...so I don't think there are any definite implications for the market," Shishido said.

Copyright Reuters, 2011