In US trading on Wednesday, bond prices pulled back off session highs after US House of Representatives Speaker John Boehner said he was "optimistic" on reaching a budget deal before the end of the year to avoid a crisis. President Barack Obama later said he hoped he and Congress can reach agreement before Christmas.

Investors are worried Washington might fail to avert $600 billion worth of tax increases and reduced outlays scheduled to automatically take effect next year, and that the plan's implementation would help drag the US economy back into a recession.

MSCI's broadest index of Asia-Pacific shares outside Japan rallied 1.1 percent, undermining the appeal of fixed-income assets.

"For now, rising risk appetite is lifting stocks and weighing on bonds, though a bond sell-off is unlikely as long as the 'fiscal cliff' issue remains unresolved," said a fixed-income fund manager at a Japanese asset management firm.

"Month-end buying will also support Treasuries prices for the rest of this week," he added.

Yields on 10-year Treasuries rose to 1.643 percent on Thursday in Asian trade from 1.623 percent in late US trade on Wednesday.

Yields on 30-year Treasuries rose to 2.80 percent from 2.789 percent on Wednesday.

On the supply side, the Treasury Department will offer $29 billion of seven-year debt later on Thursday, as part of its total of $99 billion this week.

On Wednesday, it sold $35 billion in five-year notes at a high yield of 0.641 percent, and a $35 billion sale of two-year notes on Tuesday met record demand.

On Wednesday, the Federal Reserve made two separate purchases of Treasuries under its "Operation Twist" programme aimed at lowering long-term interest rates to help the economy.

The Fed bought a total of $1.85 billion of Treasuries maturing in February 2036 through November 2042 in a morning operation, and then purchased $4.57 billion of Treasuries maturing November 2018 through November 2020 on Wednesday afternoon.