US 10-year yields were two basis points higher at 4.36% Thursday morning in New York, trimming a decline of seven basis points the previous session that was driven by strong demand for an offering of the notes. Longer maturities rose slightly as the Treasury prepared to sell $22 billion of 30-year debt at 1 p.m. New York time.

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The auction should be "digested smoothly," according to JP Morgan Chase & Co. strategists led by Jay Barry, who cited supportive valuations and low volatility. The market's ability to absorb relatively large orders has improved to levels seen prior to "Liberation Day," they added. 

Investors have recently focused their attention on fiscal policy. US bond yields have risen since President Donald Trump signed his tax bill into law last week, adding an estimated $3.4 trillion to deficits over the next decade, according to the non-partisan Congressional Budget Office.

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UK government borrowing costs have also increased on fears the government will be forced to sell more bonds to finance spending. In Japan, bond yields surged 20 basis points over the first two days of this week on concerns that politicians will loosen fiscal policy as they court voters ahead of elections. A sale of 20-year debt went off without spectacle earlier Thursday, offering some reassurance.

Initial US jobless claims fell for a fourth week to 227,000, slightly below the 235,000 expected by economists polled by Bloomberg. Treasuries were little changed after data was released. 

And interest rate swaps continue to imply the Fed will hold interest rates steady later this month, with two quarter-point reductions by year-end.