Investors had piled into US government debt and other perceived low-risk assets on fears about a further escalation in trade tensions between the world's biggest economies after a G20 summit in Osaka, Japan this weekend.

But Washington and Beijing agreed to renegotiate after US President Donald Trump offered concessions, including no new tariffs and an easing of restrictions on tech company Huawei, while China approved making unspecified new purchases of US farm products.

"What is a truce for now represents to us more sentiment than anything else," said Gregory Faranello, head of US rates at AmeriVet Securities.

With US-China trade talks seemingly back on track, there were lowered expectations the Federal Reserve would embark on an aggressive half a point rate cut at its next policy meeting on July 30-31, though traders still anticipate a more modest quarter point decrease, analysts said.

The view on a possible Fed rate cut was supported by disappointing factory data in Asia and Europe.

"The market wants a rate cut," Faranello said. "Bottom line, this is what we are priced for and the Fed certainly has a role in current market expectations."

At 9:43 a.m. (1343 GMT), benchmark 10-year Treasury yields  were up 1.20 basis point at 2.012pc, while two-year yields were 2.20 basis points higher at 1.763pc.