Treasurys were lower Tuesday in a quiet trading session as investors digested the previous week's $84 billion offering in U.S. debt.
What's moving the market: Bank of America (BAC, Fortune 500) said its losses grew to $5.2 billion in the fourth quarter, driven by the company's decision to repay bailout funds it owed to the government. Analysts had expected the company to post a $3.9 billion loss.
Morgan Stanley (MS, Fortune 500) reported profit of $617 million for the quarter, compared to a loss of $11 billion a year ago.
Wells Fargo (WFC, Fortune 500) posted a surprise profit of $2.82 billion, against analysts' expectations for a small loss. The company also repaid its bailout funds to the government during the quarter.
"Bond investors are using the bank earnings to gauge the breadth of the recovery," said Bill Larkin, portfolio manager at Cabot Money Management.
"We know things are getting better through all the TARP money being paid back. But while the loan portfolio losses are dissipating, they are still disappointing."
Government data showed that home construction fell 4% in December compared to the previous month, which was worse than economists were expecting.
Investors were also digesting the Republican election to the Massachusetts Senate seat previously held by the late Ted Kennedy.
Larkin added that the Republican win takes the chance of a second stimulus package off the table, which also helps boost bond prices.
Trouble ahead for community banks2 banks repay bailout loans
