The bond market has officially entered the pull of the

Federal Open Market Committee's

tractor beam. That's the period of time, usually about two to two and a half weeks before a scheduled FOMC meeting, that market participants raise the specter of a tightening, changes in directive, or other malfeasance by Fed members as reasons for laying low.

Trading in Treasury securities was once again dismal, as tracker

GovPX

reported volume down 41% when compared to the average first-quarter Thursday. Even though the chances of a tightening or a change in bias at the March 30 meeting have slimmed as the miserable February slips further into history, the possibilities exist. For that reason, the bond market couldn't bust higher today, even with several friendly economic releases and weakness in oil futures.

In light trading, the 30-year Treasury bond was up 8/32 to trade at 96 16/32, yielding 5.49%. The bond at one point rose about 1/2 point. The April fed funds futures contract, traded on the

CBOT

, is currently yielding 4.77%, which assigns very little chance that the Fed will tighten at the next meeting. However, bond bulls have been in charge in March, bringing the bond's yield back from its recent closing high of 5.7% on March 4 to where it is now. And if the Fed doesn't move in two weeks, the market could remain stagnant until Good Friday, when the March

employment report

is released.

"The market has found an equilibrium until the new news," said Ray Remy, executive managing director at

HSBC Securities

. "The two-year is at 5% and it was as high as 5.20%. So it has had a decent move to the upside and from now until then it's in a holding pattern." The two-year note was lately yielding 4.97%.

Supply concerns are weighing down the Treasury market, as investors get set for

AT&T

(T) - Get Report

, planning on dumping $5 billion, $6 billion, or more on the market next week.

Fannie Mae

(FNM)

will reopen a February deal to price another $2 billion or $3 billion, and the Treasury (remember them) will sell $15 billion in two-year notes next Wednesday.

The

Consumer Price Index

only rose 0.1%, which was in line with the consensus forecast, but the core CPI, which excludes volatile food and energy prices, only rose 0.1% also. The forecast was for an increase of 0.3%, and some in the market believed it was more likely to surprise to the upside rather than the downside. On a year-over-year basis, the CPI is rising 1.6%, while the core rate is up 2.1%.

What's been a concern as of late is rising oil prices, because higher commodity prices ostensibly mean the inflation outlook is worsening, which is a bad sign for the bond market. Crude oil futures have risen sharply since hitting a trough below $12 a barrel earlier this month. April crude futures opened sharply higher this morning at $15.44 and peaked at $15.55, but fell sharply to a $15.03 close. "They don't have to go higher from where they are ... If energy prices were to stabilize, then inflation would gravitate toward the core trend, which is 2.1%," said Charles Reinhard, Treasury market strategist at

ABN Amro

.

The market generally ignored March's

Philadelphia Fed

survey, which showed a weak headline figure of 10.4, down from February's 15.9 reading. Contained within the report were a couple of nuggets that point to improvement in the manufacturing sector. The new orders index rose to 27.1 in March from 18.2 in February. Mildly disturbing is the rise in the prices paid index, up to 2.6 from a negative 7. The percentage of firms reporting price increases was greater than the percentage reporting decreases for the first time since June.

"The prices paid component was not in and of itself good, but the overall index was not as high as it could have been," Reinhard said.

The trade deficit widened to a record $17 billion in January, as exports fell 1.4% and imports rose 2%. This report will cause analysts to revise first-quarter

GDP

reports downward, even though the overall economy is still strong. "Combined with the strength in homebuilding and business fixed investment, that should be enough to keep GDP growing at around a 3.5% annual rate," said a comment by

First Union's

Mark Vitner.