Bond prices fell today, with long yields rising substantially more than short ones, as the

Dow Jones Industrial Average

closed above 10,000 for the first time and the

Fed's

monetary policy committee prepared to hold its second meeting of the year tomorrow.

The rout carried the benchmark 30-year Treasury bond's yield to its highest close since March 4, the day before the release of the February

employment report

triggered a rally that lasted almost two weeks. The long bond ended the day down 23/32 in price at 94 10/32, lifting its yield 6 basis points to 5.65%.

Shorter-maturity notes held more of their value. The two-year Treasury note, for example, fell just 1/32, lifting its yield 2 basis points to 5.01%. The difference in yield between the long bond and the two-year note, a popular measure of the slope of the yield curve, widened from 60 basis points to 64, the steepest curve since Dec. 16.

Market analysts were split over the significance of the day's moves -- except in their rejection of the stock market as the driving force. (No market-driving economic indicators were released. The day's only report, February

new home sales

, was bond-friendly, slipping more than expected to 881,000 from 899,000. Economists surveyed by

Reuters

had predicted a rise to 926,000.)

Christopher Fitzmaurice, managing director at

Salomon Smith Barney

, attributed the selloff to concern about tomorrow's meeting of the

Federal Open Market Committee

and the prospect that

NATO's

bombing of Yugoslavia won't end quickly.

"What's driving the market today is the fact that the Fed's meeting tomorrow," Fitzmaurice said. "We have continued strong growth in the economy, and people are saying to themselves: 'The Fed eased

three times last fall because of the global financial crisis, not because the economy needed a boost.'" With the crisis "behind us," he continued, "people have got to be worried about what the Fed's going to be talking about tomorrow."

The committee is widely expected to leave the fed funds rate, the key short-term interest rate, unchanged at 4.75% when it meets tomorrow. But traders are less certain that the committee won't change its official bias -- presumed to still favor neither raising nor lowering the rate -- to a tightening bias.

Plus, in a departure from recent history, the committee may announce any change in its bias. At its Dec. 22 meeting,

minutes released Feb. 4 reveal, the committee decided in the future to announce changes in its bias "on an infrequent basis." Changes would be announced "only when it seemed important for the public to be aware of an important shift in the members' views," the minutes said. Any concern in the bond market about tomorrow's meeting is focused on the possibility that, with stocks at record highs, it may be one of those times.

Is there really any such concern? If so, how to explain the broad-based rally in stocks? "'FOMC fears' just doesn't hold water" as an explanation for bond market weakness while stocks are on a tear, said Mike Cloherty, senior market economist at

Credit Suisse First Boston

. It may explain the steepness of the yield curve, however, he said. Normally, fear that the Fed might adopt a tightening bias would flatten the curve as inflation concerns abated. "But the question becomes, how do stocks impact that?" Cloherty said. "There was certainly no fear today, but it could be a very negative event for stocks." In the event of a big selloff in stocks, "I don't think you'd see much flattening at all, because it could trigger some asset reallocation into the front of the curve."

As for the war over Kosovo, Fitzmaurice said the bond market -- which last week rallied as traders anticipated a mad dash to safety and liquidity -- was now starting to price in the possibility of a protracted, expensive engagement. "When you start flying bombs all over, that can lead to inflation," he said.

Recent and continuing heavy issuance of corporate bonds also continues to weigh on the Treasury market, Fitzmaurice said.

Others interpreted the weakness as a payback for unwarranted strength in the market last week. "We had a false flight to quality in Treasuries last week" as the NATO bombings got under way, said Mark Mahoney, Treasury market strategist at

Warburg Dillon Read

. "We were going up but we should not have been going up. Now we're reversing that and it's hurting bonds and helping stocks."