Treasuries followed German Bunds lower but their losses were expected to be limited as traders weighed the risk the ECB could undershoot expectations and provide only scant details of its widely-anticipated bond-buying scheme. Uncertainty also remains on when Spain will ask for aid from the euro zone's rescue funds, a condition for the ECB bond-buying.
Safe-haven government bonds lost some of their appeal on Wednesday after a media report said the ECB could buy unlimited amounts of short-dated bonds to help lower the borrowing costs of Spain and Italy, which are bearing the brunt of the crisis.
Two central bank sources told Reuters, however, that while ECB President Mario Draghi is likely to deliver a framework for new bond purchases, he will give no details of planned amounts or explicit targets for yield spreads or levels of interest rates.
"It's in the price that we're going to get something from the ECB today.
The bigger question for the market is when Spain and Italy request aid because until they do it doesn't really matter," a trader said.
"The risk is disappointment but you almost have to look past that and we'll see what he has to say. The reality is once these governments know their bond yields are lower, then they can take their foot off the reform pedal," he added.
T-note futures were last down 4/32 at 133-8/32 with benchmark 10-year T-note yields at 1.613 percent, up 2 basis points from late US levels and the trader expected them to flirt around these levels before the outcome of the ECB meeting.
Market participants also say the ECB's new bond-buying scheme is unlikely to be a panacea. "Even if the ECB gets serious and rises in Spanish yields were to stop, there is the issue of whether that would put an end to fiscal deficits in Spain," a portfolio manager for a major Japanese bank said.
While investor concerns about extreme negative risks from the euro zone seem to be ebbing for now, there is an increased focus on China's economic slowdown, the portfolio manager said, adding that the 10-year Treasury yield may move between roughly 1.5 percent and 1.7 percent for a while.
At this point, it is hard to tell whether the 10-year yield is more likely to eventually break above that range or below it, he added.
After the ECB policy meeting on Thursday, focus will turn to Friday's US jobs data and whether it reinforces rising market expectations for the Federal Reserve to announce another round of bond purchases at its policy meeting next week.