Damaging rumors swept the Treasury market Friday, triggering technically based selling. The rumors were swiftly denied, but even though the

Dow Jones Industrial Average

retreated from 10,000, bonds couldn't regain their footing.

The benchmark 30-year bond ended the day down 23/32 at 95 26/32, lifting its yield 5 basis points to 5.54%. Shorter-maturity note yields rose by similar amounts.

Rumors that

Treasury

Secretary

Robert Rubin's

resignation would be announced at

President Clinton's

news conference this afternoon and that

AT&T's

(T) - Get Report

mammoth corporate bond issue scheduled for next week would be doubled in size from the $5 billion to $6 billion figure it announced last week both hit the market in the hour between 11 a.m. and noon EST.

As the price of the Treasury bond futures contract traded on the

Chicago Board of Trade

dropped below the key 121 20/32 level, stop-loss sell orders were triggered, and the price quickly dropped to 121 3/32.

It didn't matter, ultimately, that the administration quickly denied the Rubin rumor or that AT&T said its initial announcement still stands. The damage was done, and bonds closed near their lows of the day.

"We broke some significant support levels and volume was not great," said David Ging, Treasury market strategist at

Donaldson, Lufkin & Jenrette

. "I think it highlights the fact that we're going down for the next couple of weeks." The market essentially failed to hold its best intraday levels of March 5, the day the Februrary

employment report

triggered a two-point rally by the long bond, Ging said. At the same time, key support levels were breached in the cash market: a 5.52% yield on the long bond, 5.13% on the 10-year note and 5.06% on the five-year note, the strategist said.

The specter of a larger-than-announced AT&T deal continues to weigh on Treasuries, despite the company's announcement today. It's entirely possible -- indeed, it's widely expected -- that the company, whose public filings through January allow it to issue as much as $13 billion in what would be the largest-ever corporate bond sale, will up the size of its deal in response to strong investor interest. (

MCI WorldCom

(WCOM)

holds the current record with a $6.1 billion deal last summer.)

"Who's going to buy all this paper?" Ging asked. "People are clearing their books to make room for it, and it just puts pressure on the market."

There were few other influences on prices. There were no market-moving economic indicators, and

Fed

Chairman

Alan Greenspan's

morning

speech to the

Futures Industry Association

made no reference to monetary policy or even to the economy.

"It was a strange day," said Jim Kochan, senior bond market strategist at

Robert W. Baird

in Milwaukee. "There was nothing going on, no economic data to spark a selloff, and yet we sold off." The prospect of next week's monthly auction of two-year Treasury notes is also troubling the market, Kochan said. Before today, yields had shed roughly 25 basis points in the last two weeks, which makes the notes more difficult to sell.

The Dow's failure to pierce 10,000 did nothing for Treasuries because the milestone remains well within reach. "Until we see a real significant retreat, who cares?" Ging said. "People are not going to buy till you get a clear rejection of it." A close north of 9900 "doesn't count," he added. Especially with Japan's

Nikkei 225

stock index up 18% on the year -- a powerful indication of an economic recovery under way in Asia.