By Richard Leong

NEW YORK (Reuters) - U.S. Treasury debt prices rose on Tuesday as a hefty quarterly loss at major mortgage financier Fannie Mae renewed credit anxiety which weighed on stocks and raised the safe-haven appeal of bonds.

Other negative news, including Swiss bank UBS's (UBSN.VX: Quote, Profile, Research) plan to layoff 5,500 and to sell billions of dollars of subprime mortgages at a steep discount, underscored the continuing fallout from the credit crunch on financial markets and the U.S. economy, analysts said.

"None of the news is good. The Fannie results are troubling," said Brian Edmonds, a managing director with Cantor Fitzgerald in New York.

Fannie Mae (FNM.N: Quote, Profile, Research), the biggest funding source for U.S. mortgages, posted a net loss of $2.51 billion or $2.57 a share, in the first quarter. It forecast further falls in home prices and continued problems in the mortgage market. For details, see

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Federal Reserve Chairman Ben Bernanke cited the fragile state of the housing market in a speech late Monday. He said still-strained mortgage markets were a threat to the economy and urged steps to prevent home foreclosures where possible. [nL06351623]

"All this begins and ends with housing. Unfortunately, there is no end in sight," said Richard Iley, senior economist at BNP Paribas in New York. Iley forecast another 20 percent drop in home prices from current levels.

This downbeat view on housing and credit pushed the major stock indexes sharply lower at the opening, but the equities market pared its losses in part on reassuring comments from Fannie Mae executives during their conference calls with investors. [nN06473497]