U.S. Treasuries slipped on Tuesday after equities staged a late-day bounce from earlier multi-year lows, but did not lose much ground as investors remain cautions amid relentless turmoil on the stock market.

Two-year note yields, which move inversely to the price, also held near their lowest level of the year on expectations that the Federal Reserve will leave interest rates at four-decade lows for the rest of the year and perhaps later. 

"The market has shown very, very good resilience even when the stock market turned positive a couple of times," said Marcello Frustaci, bond trader at Mizuho Securities, adding that traders were too scared to aggressively "short" the market, or place trades betting that prices would fall. 

But by the close on Thursday, Treasuries lost earlier gains and fell as stocks -- which plumbed multiyear lows on Wednesday on accounting and corporate leadership jitters -- mostly rose. 

Analysts also said stocks have become disconnected from economic fundamentals, driven lower by a loss of confidence in U.S. corporate balance sheets after the accounting scandals surrounding WorldCom and Enron Corp. 

That, in turn, has helped to keep a bid in safe-haven government securities. 

"Anything that's happening in stocks that's positive is probably discounted by the fixed-income market as a dead-cat bounce or not long-lasting," Frustaci said. 

SEISMIC SHIFT ON FED VIEW 

For bonds, the carnage in the equity market has led to a growing consensus that the Fed will not start to raise interest rates until next year. 

Some economists do not expect the Fed to begin raising interest rates until the second half of 2003, arguing that weakness in stocks will hamper the economic recovery by hurting consumer confidence and spending. 

The seismic shift in Fed expectations has spread out to the most distant Eurodollar contracts on the Chicago Mercantile Exchange, with both June and September 2003 futures hitting contract highs on Thursday, while boasting the highest daily volume of their life so far. 

The June 2003 contract is now discounting a Fed funds rate -- currently at 1.75 percent -- of around 2.75 percent, when just a few months ago the market was pricing in as much as 5.00 percent. 

At the Chicago Board of Trade, 10-year note futures settled up 6/32 at 108-27/32, off their session high. Bond futures were up 10/32 at 105-03/32, also sharply off their highs of the session. 

Ten-year futures have support at 108-24/32 and 108-16/32, said Rob Zukowski, technical analyst at 4Cast Ltd. But they could break higher to 109-1/2 to 109-28/32 and possibly hit 110-00/32 in the next few sessions before pulling back of their current rally, Zukowski said. 

At the 5 p.m. EDT New York close, the two-year cash note was flat at 100-17/32 while its yield, which moves in the opposite direction, stood at 2.59 percent. The all-time closing low yield is 2.31 percent, struck in November last year. 

Five-year notes ended off 4/32 to 102-13/32, yielding 3.82 percent, versus 3.80 percent on Wednesday. The 10-year note was off 5/32 at 101-26/32, its yield at 4.64 percent, unchanged from Wednesday. The 30-year bond was off 16/32 at 100-01/32, its yield at 5.37 percent, up from 5.34 percent at Wednesday's close. 

The Dow Jones Industrial average shed 11.97 points, or 0.14 percent, to 8,801.53, after sinking more than 2.3 percent earlier and then clawing briefly into positive ground. On Wednesday, the blue-chip measure suffered its largest one- day percentage loss since September 2001. 

The S&P 500 gained 6.90 points, or 0.75 percent, to 927.37, after tumbling more than 2 percent. The broad market gauge hit its lowest level since October 1997 a day earlier. 

And the Nasdaq ended up 28.42 points, or 2.11 percent, at 1,374.43, according to latest available figures, after falling 1.6 percent earlier in the day. The technology- packed index had ended Wednesday at its lowest level since May 1997. 

DATA SHRUGGED OFF 

Economic data attracted scant attention from the stock-fixated bond market. One report showing a small uptick in producer-level inflation and another showed the weekly number of Americans lining up for first time jobless benefits rising to 403,000, the highest level in six weeks. 

Josh Stiles, bond analyst at IDEAglobal, said the government's June retail sales report due on Friday could be firm -- economists polled by Reuters look for a 0.7 percent increase after a 0.9 percent drop in May -- but he said bond trading right now is not linked to data on the nation's economy -- at least not directly.