U.S. Treasurys yields slid from 10-month highs on Thursday after disappointing growth data from the euro zone spooked investors into pouring money into perceived safe havens.
The German economy contracted 0.6 percent in the final quarter of 2012, the worst performance since 2009, while France's shrank 0.3 percent, slightly worse than forecast.
"Even though the consensus was that it was going to be a contraction, it was worse than expected," said Steve Van Order, fixed income strategist with Calvert Investments.
The news boosted lower-risk assets such as the U.S. dollar and U.S. government debt, helping benchmark 10-year note yields fall from 10-month highs of 2.06 percent reached in overnight trading.
Treasurys added further to gains after the government sold $16 billion of 30-year bonds at a high yield of 3.180 percent.
"We expected a solid to strong auction to wrap up the refinancing," Nomura analysts wrote in a note to clients. "It came to fruition and according to our grading system, the A- grade represents an auction that is almost as strong as it gets."
Ten-year notes were last up 18/32 in price to yield 1.997 percent.
Thirty-year bonds rose more than a point before paring gains to trade up 1-03/32, yielding 3.174 percent.
The 10-year notes have been pushing up against technical support at around 2.03 to 2.06 percent, the top end of their trading range for the past few weeks. A break above this could send yields up towards the 2.20 percent area, analysts and traders said.
(Read More: Why 10-Year Notes Could Suffer a Dramatic Sell-Off)
Some investors see Treasurys yields as likely to ease after this week's $72 billion in supply is absorbed, with automatic budget cuts, scheduled to come into effect on March 1, likely to come under increasing focus.
The cuts, if implemented, are expected to reduce economic growth, which could send rates back lower.
At the same time, calmer European debt markets, still steady economic improvement in the United States and questions over when the Federal Reserve will end its ongoing bond purchase program, known as quantitative easing, are leading others to price for an uptick in yields this year.
"There's kind of a tug of war between people that feel that the sequester cuts coupled with higher taxes and the headwinds of global growth are going to slow down growth enough so that Treasurys will remain at a fairly low level," said John Fath, managing partner at BTG Pactual in New York.
"Others feel that at some point, there is a cost to QE and that at some point the Fed is going to realize that those costs are overwhelming the benefits," he added.
The Federal Reserve bought $5.15 billion in debt due 2017 to 2018 on Thursday as part of its quantitative easing effort, the last purchase scheduled for this week.
The Treasury also said it will sell $9 billion in 30-year Treasury Inflation-Protected Securities (TIPS) next Thursday.