Treasuries closed higher as the front end benefited from beliefs the Fed is still in play, but also from safe-haven trades into the holidays and year-end, with cash being parked in the two-year bonds.

On the economic data front, November import prices fell 1.3%, as prices of imported goods fell, led by cheaper oil, industrial supplies and machinery -- another sign inflation poses little threat during the first U.S. recession since 1991. The U.S. current account deficit, which gauges international trade, narrowed to $95 billion in the third quarter from an upwardly revised $107.58 billion, as Americans bought fewer overseas goods. Standard & Poor's expected a further drop to $90.9 billion.