A rebound in pending sales of existing US homes bolstered equity markets and eased safe haven demand for the dollar on Tuesday, but US Treasury bond prices fell sharply on worries about surging debt issuance. A sell-off in US government debt markets accelerated, driving up US Treasury bill rates to their highest levels since November ahead of another debt auction. US stocks struggled to stay positive. But data showed pending US home sales rose 6.3 percent in December for the first time since August, boosting enthusiasm and offsetting a 5 percent decline in bank shares over fears the government may have to nationalize some or all of the sector. Bank of America Corp's shares fell 9.3 percent, while Citigroup Inc fell 4.1 percent. Strong earnings at drugmaker Merck helped temper worries amid an otherwise gloomy corporate earnings season. Philippe Gijsels, strategist at Fortis Bank in Brussels, said corporate news will remain bad in a bear market, but the housing data offers a “glimmer of hope.” “It's good to see positive news flow from the US housing markets. This is encouraging as markets seem to react again to good news,” he said. News that the US Federal Reserve extended agreements with several other central banks to meet a global demand for dollars as policy-makers try to keep credit flowing also boosted market sentiment, although it showed credit remains tight. “The Fed is extending liquidity programs and telling you in the same breath that conditions remain quite strained,” said Craig Peckham, equity trading strategist for Jefferies & Co in New York. Still, Peckham said “we have a lot of investors desperately looking for signs that fundamental improvement is on the horizon.” The Dow Jones industrial average rose 21.18 points, or 0.27 percent, to 7,958.01. The S and P 500 Index gained 1.16 points, or 0.14 percent, at 826.60. The Nasdaq Composite Index fell 1.51 points, or 0.10 percent, to 1,492.92. The FTSEurofirst 300 index of top European shares closed 1.88 percent higher at 791.61 after having been down as much as 0.9 percent. It fell 2.4 percent the previous session. Vodafone , the world's No. 1 mobile phone group by sales, led telecoms higher in Europe after it raised its 2009 guidance on favorable foreign exchange movements and said customers are using their mobiles more despite the downturn. Gains in the euro were limited as many investors awaited the ECB's policy-making meeting on Thursday, when it is widely expected to leave interest rates on hold at 2 percent. The euro rose 0.75 percent to $1.2945. Against the yen, the dollar fell 0.35 percent to 89.15. The dollar fell against a basket of major currencies, with the US Dollar Index down 0.82 percent at 85.402. The benchmark 10-year US Treasury note fell 27/32 in price to yield 2.82 percent. The 2-year US Treasury note fell 3/32 in price to yield 0.95 percent. The housing report “is a real shot in the arm for (risk) sentiment,” said Brian Dolan, chief currency strategist at Forex.com, in Bedminster, New Jersey.