Treasurys were mixed Wednesday but off earlier lows, buffeted by a stock market struggling to rebound from its worst new year start in history on persistent recession worries.
Still benchmark debt prices hovered near multi-year highs, supported by safe-haven bids spurred by the wild daily swings in stocks.
"This (stock) market is in pretty bad shape," said Lou Brien, market strategist at DRW Trading in Chicago. The Treasury market "is the safe-haven place to be," he said.
Major U.S. stock indexes were mixed on the day, well below their opening levels. On Tuesday, a late sell-off sent the Standard & Poor's 500 index to its worst-ever five-day start to a year.
Benchmark 10-year Treasury note yield, which moves inversely with its price, edged higher after touching its lowest since March 2004. It last traded 3.79 percent, up 1 basis point from late Tuesday.
"If you see equities rebound, you will see Treasurys correlate with that," Sean Simko, head of fixed income investment at SEI Investments Co. in Oaks, Pa., said of the tight inverse relationship between bonds and stocks.
In the early days of 2008, stocks have been slammed by a gloomy outlook on corporate earnings and the economy, reinforced by recent signs of deterioration in the manufacturing and consumer sectors, analysts said.
Bonds have benefited from the ongoing hemorrhage in stocks, helped further by expectations that the Federal Reserve would opt to cut interest rates by an aggressive half percentage point at the end of its Jan. 29-30 policy meeting.
Fed officials who spoke publicly this week have signaled that further rate cuts are likely to combat the heightened downside risks on the economy. But they also seemed to be tempering expectations that they would make huge rate cuts, given their concerns about inflation.
On Wednesday, St. Louis Fed President William Poole said inflation expectations are "quite well anchored," giving the Fed room more rate cuts, but there is no clear evidence that a recession is at hand.
Meanwhile, more Wall Street firms are predicting a recession will occur. Goldman Sachs said on Wednesday it expects the economy will contract in the second and third quarter by an average of 1 percent on an annualized basis during both of those quarters.
In other cash trading, two-year debt was unchanged in price to yield 2.69 percent, and the long bond was down 9/32 in price for a 4.32 percent yield, up 2 basis points from late Tuesday.