The Philadelphia Fed said that its index of business conditions rose to the highest level in a year.

"The Philly Fed I think was the impetus for the move higher in yields," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.

"There were some pretty solid underlying fundamentals as well, so it does suggest that maybe we are seeing a little bit of basing in some of the manufacturing indices."

Benchmark 10-year notes fell 3/32 in price to yield 2.069pc, up from 2.061pc late Wednesday.

Yields have risen from more than 2-1/2-year lows reached earlier this month and the yield curve has steepened as jobs, inflation and retail sales data show that the US economy is improving.

The yield rise has been capped, however, by dovish global central bank policy as the US-China trade war weighs on the international economic outlook.

"We haven't really seen global growth pick up in a material way, trade volumes are still quite low, there are certainly dark clouds on the horizon and those have not gone away," Goldberg said.

The Federal Reserve is seen as certain to cut rates when it meets later this month.

Interest rate futures traders are pricing in a 65pc chance of a 25 basis point cut this month and a 35pc likelihood of a 50 basis point cut, according to the CME Group's FedWatch tool.

The euro and government bond yields across the single currency bloc fell on Thursday, following a report by Bloomberg News that European Central Bank staff are studying a potential change to the bank's inflation goal of 'near 2pc'.

The report quoted sources as saying ECB staff were studying the bank's approach informally, including whether a more flexible target might be more appropriate in the post-crisis era - potentially allowing inflation to stay higher for a certain time.