Treasuries were narrowly mixed on Tuesday as investors looked to stocks for indication of investors' appetite for risk, which at the moment was not very high.
Trade was erratic, with bonds starting off the session lower on profit-taking but then rebounding on rumors that another large financial institution was facing big debt write-downs.
"There's still a lot of nervousness about the whole credit situation," said Brian Robinson, bond strategist at 4Cast.
Benchmark 10-year notes were 2/32 higher and yielding 4.33 percent. Bond yields and prices move inversely.
Stocks were hugging the unchanged mark after Goldman Sachs denied rumors that it would face large write-offs.
Few traders were willing to call a bottom in yields, as uncertainty and mistrust continued to dominate financial markets amid the worst credit squeeze in at least a decade.
Any further signs of strain in the banking sector, just two days after Citigroup CEO Charles Prince resigned and the firm announced up to $11 billion in debt write-downs, would likely help bonds.
The news from housing remained dire, but that no longer seemed sufficient to rally bond bulls. Indymac Bancorp, one of the largest U.S. mortgage lenders, reported its first quarterly loss since 1998, and one more than five times its own forecasts.
Against this backdrop, pessimism went all the way up the policy-making chain, and was not confined to the United States. Bank of England Governor Mervyn King said banks would take considerable time to flush out losses related to subprime mortgages, echoing statements by Treasury Secretary Henry Paulson.
Current Fed Governor Randall Kroszner was cautious too, saying the mortgage market mess was likely to worsen before it got any better.
Analysts were looking for clarity from Ben Bernanke, the Fed chief, but would likely not get it from a speech on "Community Development" later on Tuesday. Rather, they would have to wait for a Congressional testimony on Thursday, where lawmakers are expected to grill him on the crisis.