Two-year treasuries rose on Tuesday after released minutes from the Federal Reserve showed policy makers' view that a recession is likely in the first half of the year.
Two year notes rose 3/32 in price to yield 1.884 percent.
Members of the Federal Open Markets Committee meeting on March 18 were concerned about a prolonged and severe economic downturn.
Investors raised their bets that the Fed will reduce its key interest rate by half a percentage point to 48 percent compared to 36 percent yesterday, according to futures trading on the Chicago Board of Trade.
Ten year notes fell 5/32 in price to yield 3.564 percent. Earlier in the day, additional signs of credit market instability helped two-year notes gain.
The largest U.S. savings and loan bank, Washington Mutual Inc, announced a significant loss its latest quarter. WaMu said it would take a $1.1 billion loss, cut its dividend and slash 3,000 jobs. It also announced a $7 billion stock sale to raise capital to bolster its ailing balance sheet.