US Treasury debt yields climbed to roughly five-month peaks overnight, spurred by gains in German and British bonds as investors speculated that the Bank of England and the European Central Bank would both hold off on further easing measures.
"A lot of the moves today in Treasuries are being led by the dramatic steepening of the bund (German bonds) and gilt (UK bonds) curve," said Subadra Rajappa, head of US rates strategy at Societe Generale in New York.
German 10-year bund yields rose to five-month peaks, while those for 10-year British bonds advanced to more than four-month highs, lifting US Treasury yields in the process.
Strong growth data in Britain prompted a sell off in the world's largest benchmark bonds on Thursday, with investors believing the Bank of England is now less likely to cut interest rates at its policy meeting next week.
In the case of the ECB, while the market believes the bank will extend asset buying beyond a March deadline, the expectation is that it will slow the pace of its bond purchases.
"If they're (BoE) going to be on hold and the ECB potentially announcing some sort of tapering program at the December meeting, that would at the margin create inflation expectations and that's kind of driving the steepening of the yield curve," said Societe Generale's Rajappa.
With gains on the long end, the Bund yield curve has steepened to around 72 basis points, its widest since early March, while the spread between long-term and short-term gilts rose to 95 basis points, the highest in four months.
The spread between short- and long-term US Treasury yields curve has increased as a result to 126 basis points, the highest in a week.
A US 7-year note auction, meanwhile, came in in line with recent results. The note's high yield was at 1.653 per cent, the highest since January. Bids totalled $US69.7 billion for a 2.49 bid-to-cover ratio, in line with September's 2.47.
Indirect bidders, consisting of foreign central banks, accepted 61.5 per cent, slightly higher than September's 59.4 per cent and the 60.2 per cent average.
In late trading, benchmark 10-year Treasury notes were down 16/32 in price to yield 1.846 per cent, up from 1.79 per cent late on Wednesday. Earlier, 10-year yields hit a five-month high of 1.87 per cent.
US 30-year bonds were down more than a point in price to yield 2.605 per cent, up from Wednesday's 2.537 per cent. Thirty-year yields earlier hit a five-month peak of 2.631 per cent.
US two-year note yields were at 0.884 per cent, up from Wednesday's 0.872 per cent. Earlier on Thursday, two-year yields touched five-month highs of 0.896 per cent.