Myanmar nationals Wa Lone, 31, and Kyaw Soe Oo, 27, are accused of possessing classified documents thought to relate to the violent military crackdown on the Rohingya Muslim minority.
The crackdown in northern Rakhine state has forced nearly 700,000 Rohingya Muslims over the border into Bangladesh since August, many carrying allegations of rape, mass murder and arson at the hands of Myanmar's army.
The journalists, who have been in custody since December, say they were given the papers by two policemen who had invited them to dinner in the outskirts of Yangon.
As they left the restaurant, they say they were arrested before they even had a chance to look at the documents.
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The court had discretion to grant bail if it deemed that their detention had been unlawful.
Today's bail decision was crucial as pre-trial hearings are expected to drag on for several months before the court officially decides whether to take on the case or not.
The pair are now expected to remain in jail throughout that period.
On hearing the refusal of bail, Wa Lone's wife Pan Ei Mon cried.
"I hoped to get it," she told AFP, crying. "I even cleaned his room last night to prepare for him getting bail."
The military later acknowledged members of the security forces took part in the extrajudicial killing, saying it would hold those responsible to account.
UN special rapporteur to Myanmar Yanghee Lee added her voice in support of the journalists from a press conference in Seoul, calling the pair "brave" and "fearless".
She has been banned from Myanmar by authorities who say she is working with a bias against the country.