President Barack Obama signed a deal on Wednesday to stave off some $600 billion in automatic tax hikes and spending cuts. But Republican lawmakers, angry the deal did little to curb the federal deficit, said they would use a debate over lifting the US debt ceiling to win deep spending cuts.

Failure to raise the borrowing limit could mean a US debt default.

 "We had a knee-jerk reaction yesterday... There is still a lot of work to be done ... on spending cuts," one trader said.

At 0703 GMT, safe-haven Bund futures were 5 ticks lower at 144.02, having fallen by almost 150 ticks on Wednesday.

Center>Copyright Reuters, 2013