Short-term Treasurys sold off Wednesday after Federal Reserve Chairman Ben Bernanke appeared to hint that the central bank may be close to ending its streak of interest rate cuts.

In remarks to Congress' Joint Economic Committee, Bernanke said the capital markets remain under stress despite the Fed's recent unusual efforts to make funds more accessible to banks. This statement seemed to indicate that the Fed expects to continue reducing rates.

Yet the Fed chief also noted the extraordinary amount of economic stimulation that the central bank has provided since last summer, a sign that its work may nearly be done. "Much necessary economic and financial adjustment has already taken place, and monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year," he told the lawmakers.

Since September, the Fed has slashed its overnight lending target to 2.25 percent from 5.25 percent. Investor perception that the Fed rate-cutting spree could be nearing an end sparked purchasing of the 2-year and other short-term notes.

The 2-year note is most sensitive to interest rate policy considerations and investors often sell it to push its yield higher as a signal they expect the Federal funds target either to remain steady or increase.

In Wednesday's trading, the 2-year note lost 6/32 to 99 23/32, with a yield of 1.90 percent, up from 1.81 percent late Tuesday, according to BGCantor Market Data. Prices and yields move in opposite directions.

The fact that the 2-year yield is at 1.90 percent and nearing the Fed funds target of 2.25 percent shows that some investors expect just one more rate reduction of 0.25 percent. Such a cut would push the overnight target to 2 percent.

The benchmark 10-year Treasury note fell 6/32 to 99 9/32 with a yield of 3.59 percent, up from 3.56 percent late Tuesday.

The 30-year long bond gained 7/32 to 99 25/32 with a yield of 4.39 percent, down from 4.41 percent the day before.

The yield on the 3-month note remained unchanged from Tuesday at 1.39 percent while the discount rate still hovered at 1.36 percent.

In after-hours trading, Treasury prices mostly fell, sending yields higher. As of 5:30 p.m. Eastern time, the 10-year yield rose to 3.60 percent; the 30-year yield rose to 4.43 percent; and the 2-year yield was at 1.90 percent.

Bernanke also kept economic concerns in the forefront by telling the Joint Economic Committee a recession is possible; he warned there may not be any growth, as measured by gross domestic product, during the first half of this year.

However, a recession consists of two straight quarters of economic shrinkage and can only be declared in hindsight.

At the same time Bernanke also said he expects stronger economic growth in the second half of this year and into 2009. In general, Treasurys benefit from signs of economic weakness and sell off on indications of growth.

The Fed chief also provided the market with insight into the bank's role in assisting JP Morgan Chase & Co.'s purchase of Bear Stearns Cos. Inc last month. He called the rescue a "rare event" and expressed hope that there would be another similar occurrence.

Bernanke said the Fed had no choice but to jump into the action after Bear Stearns warned that bankruptcy is imminent. To allow Bear Stearns to collapse would have wreaked more damage on already troubled markets, he said.