Sell the rumor, sell the news.

The Treasury market is in full selling mode this morning. It started before the 10 a.m. EST release of the February

Purchasing Managers Index

, which indicated expansion in the manufacturing sector for the first month since May. And the plummet is continuing.

The benchmark 30-year Treasury bond lately was off 1 11/32 at 93 28/32, lifting its yield 10 basis points to 5.68%, the highest since July 31. Shorter-maturity note yields are faring only slightly better. The two-year Treasury was off 3/32, boosting its yield 5 basis points to 5.20%.

All three economic reports out this morning were stronger than expected, but the Purchasing Managers Index is the most important. The

National Association of Purchasing Management's

index, which signifies manufacturing sector expansion when it's over 50 and contraction when under 50, rose to 52.4 for February from 49.5 in January, its eighth consecutive month below the break-even line. Economists surveyed by

Reuters

had forecast a reading of 50.

' We can't ward off the bears now,' said Miller Tabak Hirsch's Tony Crescenzi. 'I think they're going to be in charge for the rest of the week. There's just no reason to get long bonds with the economy firing on all cylinders.'

Manufacturing has been the leading casualty of the Asian financial crisis, as demand from that region for U.S. manufactured products has dried up. Today's report, which contains a separate index for export orders, flicks on the light at the end of the tunnel. The new export orders index vaulted from 49.8 in January, its 14th consecutive month below the break-even line, to 54.0.

"Though it may be premature to say that manufacturing is back, particularly with the softness in prices, this certainly signals a possible reversal of fortunes in the sector," NAPM Chairman Norbert Ore said in a statement.

For the bond market, the report sticks yet another dagger in the hope that the growth will slow enough the year to keep interest rates from rising. "It shows you that the global economy is on the mend, particularly Asia," said Tony Crescenzi, chief bond market strategist at

Miller Tabak Hirsch

.

Bond bulls can take a bit of comfort, Crescenzi said, from the fact that the report's employment index rose only slightly and remained below break-even at 45.0 (up from 44.8 in January) -- allowing hope that the February

employment report

, scheduled for release on Friday, won't detect a rebound in sagging manufacturing payrolls.

Still, "We can't ward off the bears now," the strategist said. "I think they're going to be in charge for the rest of the week. There's just no reason to get long bonds with the economy firing on all cylinders. Where is the weakness? Now there's no sector you can point to."

Two other, less market-moving economic reports were also stronger than expected this morning.

Personal income

and

consumption

each rose more than expected in January. Personal income rose 0.6%, versus expectations for a 0.2% gain, and consumption rose 0.3%, a tenth more than expected. And January

construction spending

rose 1.6%, smashing the 0.3% forecast.