European Central Bank's Governing Council member Ewald Nowotny said that giving Europe's permanent rescue fund a banking licence to increase its capacity had merits. Up till now, the ECB has rejected the idea.

Still, the yields could drop further as the mood in the euro zone remains extremely fragile amid the ever-deepening debt crisis. German business sentiment data on Wednesday showed in July it dipped to the lowest level in more than two years.

10-year Treasury notes traded 4/32 lower in price to yield 1.41 percent, up from a record low of 1.3808 percent set the day before.

Treasury yields have been pushed down by the global growth concerns, worries Spain will need a massive financial bailout on top of a bank rescue plan already in place, and concerns that Greece's debt woes could eventually force the country's exit from the euro zone.

"We are getting ever closer to the point where central banks will pull the trigger and ease," said Sebastian Galy, strategist at Societe Generale. "The outcome of this potential easing should be to stabilise sentiment."

The yield on 30-year bonds stood at 2.4675 percent, up from the previous session's trough of 2.4470 percent.

Treasury Department announces sales of 3- and 6-month bills at 1500 GMT and sells 7-year notes at 1700 GMT.