U.S. Treasuries made small gains on Tuesday after an industry report said the number of pending home sales fell more than expected, causing concern that the housing crisis could deepen even more.

The Pending Homes sales Index fell 6.5 percent, more than the expected 2.1 percent drop.

Benchmark 10-year notes were up 3/32 to yield 4.54 percent, down a basis point for the day. The two year yield rose 2/32 to yield 3.975.

In other economic news, a report on Wednesday will give investors a clue about the health of the economy as a key indicator for the service industry is released.

The Institute for Supply Management's indicator for the service sector has been steady for the last two months at 55.8. Readings above 50 indicate growth in the sector.

A drop in the index could indicate slowing economic activity, possibly providing some fuel for the Fed to cut rates further.