Treasury bond yields edged lower in Europe on Wednesday after Bear Stearns told investors two of its hedge funds had very little value, and stocks were hit by weaker-than expected company earnings.
The Bear Sterns news, on Tuesday, sparked a flight to safe-haven government debt and renewed concerns about the troubled U.S. mortgage market.
Stocks were also hit after internet media company Yahoo and computer processors maker Intel posted weaker-than-expected earnings. The Dow Jones industrial average fell after it had surpassed its 14,000 milestone for the first time.
The Dow Jones fell (back from its peak) yesterday, so the stock market seems to have run out of steam and there was bad news from Bear Stearns so credit worries are still in the fore of investors minds, said Nick Stamenkovic, bond strategist of RIA Capital Markets.
The focus for investors now turns to June U.S. consumer price inflation data at 1230 GMT and Federal Reserve Chairman Ben Bernanke's Congressional testimony starting at 1400 GMT.
They will look to Bernanke for any signs on where the Fed stands on the economy, monetary policy and the growing nervousness surrounding the subprime and credit markets.
At 0951 GMT the September T-note future was up 15/64 at 105-36/64.
The two-year yield was down 1.3 basis points at 4.874 percent, and 10-year yields were down 0.8 basis points at 5.045 percent. The ultra-long 30-year debt yield was unchanged at 5.135 percent.
The bigger things for today are going to be stocks, credit and then Bernanke's speech. Bernanke's going to be upbeat about the economy and hawkish on inflation but I will not be surprised if he mentions the current mortgage or subprime market, one trader said.
Stamenkovic said he expected Bernanke to play down worries about the subprime market.
He added housing data, due out later at 1230 GMT, was unlikely to have a major effect on the market after the National Association of Home Builders said its sentiment index had fallen to a 16-1/2-year low.
We've got the housing starts today but that's going to tell us what we already now - the housing sector is in severe difficulty and will continue to act as a drag on the economy, Stamenkovic said.