U.S. Treasuries were firm in Asia on Thursday, with the yield on 10-year notes near a three-week low on concerns over the fiscal cliff as well as hopes for fresh easing steps by the Federal Reserve.
The 10-year notes traded at a yield of 1.591 percent, little changed from late U.S. levels and near Wednesday's low of 1.576 percent, which was its lowest level in nearly three weeks.
Although many investors expect political leaders in Washington to eventually reach a deal to avert a sharp fiscal contraction from the planned spending cuts and expiry of tax cuts early next year, there was no sign of progress in talks on Wednesday.
The White House and Republicans in Congress spent much of the day talking up their positions.
"Most people think there will be a deal at some point. Still I guess politicians cannot compromise easily, which means there's risk they will go off the cliff," said a trader at a Japanese bank.
The two-year yield stood at 0.238 percent, and could fall to its lowest level since early October, as market players expect the Federal Reserve to end selling in short-term notes as the Operation Twist expires this month.
Economists expect the Fed to replace the Operation Twist, in which it buys long-dated bonds and sells the same amount of shorter-dated ones, with a fresh bond buying programme.
"Because of Operation Twist, brokers have a large amount of short-term bonds. That will probably disappear next year," said the trader.