New applications for US jobless benefits fell more than expected last week and the number of Americans on unemployment rolls hit a 17-year low.

Other data showed a jump in labor costs, raising expectations that wages will continue to increase and help boost inflation to the Fed's 2 percent target.

"The labor cost number was higher than expected, which is giving people the belief that wages are going up," said Charles Comiskey, head of Treasuries trading at Bank of Nova Scotia in New York.

Benchmark 10-year notes  fell 14/32 in price to yield 2.36 percent, their highest since April 10, and up from 2.31 percent late on Wednesday.

The US House of Representatives was set on Thursday for a cliffhanger vote to repeal Obamacare, with House Republican leaders expressing confidence that the bill will pass.

The belief that a healthcare overhaul will proceed has boosted investor expectations that the Trump administration will also be able to pass fiscal reforms aimed at bolstering economic growth.

"It all falls into the story that the Fed is going to continue to raise rates, that growth is going to pick up with fiscal reform and therefore interest rates have to go higher," said Comiskey.

Expectations of a rake hike in June increased after the Fed on Wednesday downplayed weak first-quarter economic growth as transitory and emphasized solid inflation and the strength of the labor market.

Futures traders are pricing in a 74 percent chance of a June rate hike, up from 71 percent before the Fed statement, according to the CME Group's FedWatch Tool.

The next major US economic data release will be Friday's payrolls report for April. Employers are expected to have added 185,000 jobs in the month, according to the median estimate of 101 economists polled by Reuters.

French centrist Emmanuel Macron was also seen as solidifying his lead over far-right leader Marine Le Pen before Sunday's presidential election, which reduced demand for safe-haven US bonds.