Treasury notes turned slightly lower lower on Wednesday after regulators removed some lending restrictions from Fannie Mae and Freddie Mac, and Federal Reserve Bank Chairman Ben Bernanke indicated a willingness to continue lowering interest rates.

Two year notes fell 1/32 to yield 2.012. Ten year notes dropped 2/32 to yield 3.864.

U.S. stocks staged a comeback in the late trading. The Dow Jones Industrial average closed up 9.36 points. When stocks were lower earlier in the day treasuries had been rising.

Meanwhile the Office of Federal Housing Enterprise Oversight, which looks after government sponsored firms such as Fannie and Freddie said it would remove limits on $1.5 trillion in mortgage portfolios.

Fed Chief Ben Bernanke noted risks in the housing, labor and credit markets. He also he was less worried about inflation than growth. He saidbefore a congressional committee that looking ahead inflation could be lower than we anticipate if slower-than-expected global growth moderates the pressure on the prices of energy and other commodities.

He said the Fed will act in a timely manner to protect against downside risks to the U.S. economy.