Treasury prices mixed in choppy trading
Government bonds seesawed on volatile oil prices and choppy stock trading. Merrill Lynch drove some bonds higher.
NEW YORK (CNNMoney.com) -- Bond prices struggled for direction Wednesday, as economic jitters persisted.
The benchmark 10-year note rose 2/32 to 100 and yielded 3.88%, down from 3.90% late Tuesday. Bond prices and yields move in opposite directions.
The 30-year long bond fell 2/32 to 98 22/32. Its yield edged higher to 4.46% from 4.45% in the previous session. The 2-year note was unchanged from Tuesday at 100 24/32, and its yield held at 2.48%.
Merrill Lynch: Bonds advanced as Fitch put Merrill Lynch's long-term rating on negative watch Wednesday.
Fitch is considering a change to Merrill Lynch's (MER, Fortune 500) long-term, investment-grade "A+" rating because the bond rater anticipates the investment bank will report its fourth consecutive quarterly loss when it posts its results next week. Fitch blames the expected loss on Merrill's exposure to bond insurers and write-downs on residential mortgages and collateralized debt obligation portfolios.
Investors are nervous that the fallout of the credit crisis will continue to roil the stock market. Those jitters are luring investors into the perceived safety of the government bonds market, said Avalon Partners chief economist Peter Cardillo.
"The news out of Fitch putting Merrill Lynch on negative watch list is basically what's behind bonds' early strength," said Cardillo. "That's the big news that's responsible for market volatility Wednesday."
Other markets: Crude prices turned slightly higher in volatile trading Wednesday after a bigger-than-expected gain in gasoline supplies countered Iran's test-firing of nine ballistic missiles, seen as a possible threat to the flow of Middle East oil.
The dollar fell against other currencies, giving up gains made in the previous session. Investors were concerned with the continuing credit crisis and problems in the stock market.
"Bonds are struggling for direction because there is no real economic news," said Cardillo. "The dollar is taking a hit market, but stocks and oil are moving sideways, at least for now." 
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