The Treasury market ended a humdrum session slightly lower, giving up some of the ground it gained yesterday when blue-chip stocks went into free-fall. A sharp retreat by oil helped stem the losses.

Fed

Chairman

Alan Greenspan

gave a

speech in the morning, but didn't say anything about monetary policy. He addressed the Independent Community Bankers of America in San Antonio and warned them against being lulled into a sense that the economy will rock 'n roll forever.

"We have seen growing evidence of credit granted solely on the expectation that current robust conditions will continue indefinitely, with little thought as to how borrowers might perform under more stressful conditions," he said.

The only major economic release, the

Beige Book

, had a bearish tone but contained no real surprises. It

described "appreciable expansion of economic activity during late January and February," accompanied by "tight supplies and upward wage pressures for various types of labor," but "limited ... increases in the prices of final goods and services."

So bonds defaulted to their inverse trade with the stock market, taking heart from weakness in stocks, which is seen as the key to slowing the economy's growth, and retreating when stocks rally.

The pattern strengthened in yesterday's session, when a profit warning by

Procter & Gamble

(PG) - Get Report

sent the

Dow Jones Industrial Average

reeling, and it will benefit bonds in the months ahead, predicted Gerald Thunelius, head of investment-grade taxable fixed income at

Dreyfus

.

"Earnings are starting to react to what bonds have been fearing for the last year," he said -- rising commodity prices. "It's coming home to roost and people are starting to pay attention."

Additional gains by oil and other commodities may hurt bond prices, but not as much as they'll hurt the prices of stocks and other assets, Thunelius is betting. "I think the picture for bonds is that this is not the time or place to be short," he said. Yields could still go higher, but if they do, "there's probably going to be even more pain for the other markets."

The benchmark 10-year Treasury note finished down 1/32 at 100 29/32, lifting its yield a fraction of a basis point to 6.375%. Shorter-maturity issues were likewise little changed. The erstwhile benchmark 30-year bond ended down 5/32 at 101 8/32, lifting its yield 1.2 basis points to 6.158%.

At the

Chicago Board of Trade

, the June

Treasury futures contract closed down 7/32 at 94 18/32.

Meanwhile, the Treasury issues that the government is planning to buy back from investors for the first time in 70 years tomorrow were underperforming at midsession.

Tomorrow the Treasury Department will solicit offers from dealers for up to $1 billion of thirteen 30-year bonds issued between 1985 and 1990. The issues have final maturities between February 2015 and February 2020.

"It's classic buy the rumor, sell the fact,"

Merrill Lynch

Treasury market strategist Jerry Lucas said. "On a day when the market has done nothing, a bond in the buyback sector cheapened by one and a half basis points" relative to the most recently issued 30-year bond.

The buyback program, which the department has said aims to take up to $30 billion of long-maturity Treasuries out of circulation this year, is one of the ways it is dealing with the federal budget surplus, which reduces its need to borrow. By buying back old issues while continuing to issue new ones, the department helps maintain the liquidity of its securities.

Economic Indicators

The weekly

Mortgage Applicaations Survey

detected slight increases in both refinancing and new mortgage activity. The Refinancing Index rose to 377.5 from 346.6, while the Purchase Index rose to 291.7 from 278.4.

Currency and Commodities

The dollar gained against the yen and weakened against the euro. It lately was worth 107.16 yen, up from 106.11 yesterday. The euro was worth $0.9607, up from $0.9592 yesterday. For more on currencies, please take a look at

TSC's

new

Currency Watch column.

Crude oil for April delivery at the

New York Mercantile Exchange

retreated to $31.26 a barrel from yesterday's multi-year high of $34.13 on indications Iran will go along with

OPEC's

production hikes slated for April 1.

The

Bridge Commodity Research Bureau Index

fell to 213.70 from 215.66.

Gold for April delivery at the

Comex

fell to $290.00 an ounce from $293.70.