Treasuries moved in tight ranges in thin trade as many Japanese investors were away for the country's "obon" holidays and other participants in Asia were on summer vacation.
Firm Asian shares, with Korean shares up 3.8 percent and Hong Kong shares up 0.8 percent, weighed on Treasury prices.
Some market focus is on the Franco-German meeting to discuss what further measures they can take to contain Europe's debt crisis, although many investors don't expect to see major developments from the meeting, Tokyo dealers said.
French President Nicolas Sarkozy and German Chancellor Angela Merkel meet in Paris from 1400 GMT. A joint news conference is due at 1600 GMT.
On Monday, Treasuries fell as investors unloaded longs after US stocks gained sharply for third straight session. Stocks and oil prices rose on acquisition news -- Google offered to buy Motorola Mobility Holdings Inc for about $12.5 billion in cash.
"The market was overly pessimistic about the US and European economies, but now investors are changing that perception by thinking the situation is not as bad as originally thought," said Hiroki Shimazu, senior economist at SMBC Nikko Securities.
"More corrective sales in Treasuries could emerge should the outlook for the US economy improve," he said.
September 10-year note futures slightly fell by 2.5/32 to 129-15/32. Trading was thin by late morning in Asia with volume totalling 20,220 lots.
Ten-year Treasury notes inched up 1/32 in price to yield 2.302 percent. Thirty-year bonds eased 2/32 in price to yield 3.776 percent.
Japanese institutional investors are looking to reallocate their funds in medium- and long-dated Treasuries as well as US corporate debt to raise returns heading into the second half of the Japanese financial year, which starts in October, Tokyo traders said.
They are believed to be holding large cash positions, having locked in some profits from Treasuries in recent rallies and slashing positions in euro-denominated debt due to uncertainty about the region's debt crisis, they said.
"Japanese investors are expected to review their strategy when they return from the holidays. They are facing difficulties managing their funds due to sharp falls in Treasury yields," one fund manager at a Japanese asset management company said.
Copyright Reuters, 2010