The Treasury market ended an abbreviated session narrowly mixed, as the third installment of the Treasury Department's bond buyback program failed to have a lasting impact on prices.

So did the day's economic news. The weekly count of

initial jobless claims hit a new generational low, indicating extreme tightness in the labor market. And the

Philadelphia Fed Index printed considerably higher than expected.

Traders now retreat for the long weekend to contemplate how next week's slate of economic reports may affect the monetary policy outlook, and how a changed monetary policy outlook may -- or may not -- affect the prices of Treasury securities. That slate includes a couple of biggies -- the first-quarter

Employment Cost Index and the first estimate of first-quarter

GDP, both on Thursday.

In today's trading, only the 30-year Treasury bond ended higher. The benchmark 10-year note was unchanged at 103 21/32, its yield 6.000%. Shorter-maturity issues lost a bit of ground. But the bond rallied 9/32 to 105 29/32, trimming its yield 1.8 basis points to 5.831%.

At the

Chicago Board of Trade

, the June

Treasury futures contract gained 2/32 to 98 2/32.

The market was uniformly stronger early in the session as traders anticipated Treasury's latest buyback. The department is using government surplus funds to pay down debt by buying old, high-interest bonds back from investors at market prices. In the latest operation, it accepted $2 billion of offers of 30-year bonds issued from 1990 to 1995. Dealers tendered a total of $8.525 billion. In the last buyback on

March 16, the department accepted $1 billion of offers, and dealers tendered a total of $6.446 billion.

There's no objective criteria for evaluating the buybacks, but market participants said the price action after offers were accepted at 11 a.m. EDT suggested that relatively few dealers had their offers accepted. Prices turned down because dealers whose offers weren't accepted were trying to sell some of the bonds they expected the Treasury to buy, they said.

"A couple of guys were more aggressive than most, leaving a lot of guys with stuff to sell," said Bill Kirby, head of government bond trading at

Prudential Securities

. "The average person involved in the sector didn't sell as much as they expected to."

But prices came off their lows after a key technical support level held, Kirby said.

The key question at this point is whether long-maturity Treasury yields can remain at relatively low levels even if next week's economic data give the Fed reason to envision hiking the

fed funds rate at least twice more in the coming months, said Jim Kochan, senior bond strategist at

Robert W. Baird

.

Investors in long-term Treasuries "don't seem to be very concerned that the funds rate is going higher, maybe significantly higher," Kochan said. The fact that long-term yields have stayed relatively low while the short-term rates determined by the Fed continue to rise, suggests that investors believe that falling stock prices will be sufficient to slow the economy. "It's an interesting experiment," he said. "Can there be enough tightening to slow the economy without producing much pain and suffering in bondland? That will be a first."

Economic Indicators

Initial jobless claims fell to 257,000 last week, the lowest total since December 1973. The four-week average of initial claims also hit a 26-year low.

Meanwhile, the Philly Fed Index rose to 27.2 in April, the highest since July 1996, from 25 in March. A sub-index measuring prices paid by Philadelphia-area manufacturers eased slightly from the five-year high of 33.6 it reached in March, to 33.5. But another sub-index measuring prices received by the manufacturers leapt to a five-year high of 18.2 from 8.7.

That's "alarming,"

Miller Tabak

bond strategist Tony Crescenzi opined in a research note, because "the prices that manufacturers receive are a reflection of their pricing power and the willingness of buyers of manufactured goods to pay those prices." If the trend continues, look for more big gains in the core

Consumer Price Index, Crescenzi said.

Finally, the

federal budget for March showed a larger-than-expected deficit for the month. The government ran a $35.380 billion deficit in March, compared to a $22.409 billion deficit last March. But six months into the fiscal year, the government is in a better position ($35.6 billion in the red) than it was at the same point last year (when it was $48.8 billion in the red). The government is expected to end the fiscal year with a $142.5 billion surplus.

Currency and Commodities

The dollar rose against the yen and the euro. It lately was worth 105.73 yen, up from 104.80. The euro was worth $0.9375, down from $0.9403. For more on currencies, please take a look at

TSC's

Currencies column.

Crude oil for May delivery at the

New York Mercantile Exchange

rose to $25.88 a barrel from $25.80.

The

Bridge Commodity Research Bureau Index

fell to 212.88 from 213.49.

Gold for June delivery at the

Comex

fell to $281.50 an ounce from $282.50.