Long-maturity Treasuries gained moderately despite a uniformly strong slate of economic data -- including the biggest increase in inflation at the wholesale level in nearly 10 years -- and the massive blue-chip stock rally. The action dropped the 10- and 30-year note and bond yields to their lowest levels in months.

The Treasury Department's purchase $1 billion of long-dated Treasuries from investors was partly responsible. In addition, the Treasury market is in very good shape from a technical-analysis standpoint.

Lucky. It faces another key test tomorrow in the form of the

Consumer Price Index

, the broadest measure of inflation.

The benchmark 10-year Treasury note rose 9/32 to 101 27/32, trimming its yield 3.8 basis points to 6.247%, its best close since Dec. 15. The 30-year Treasury bond rose 12/32 to 102 25/32, dropping its yield 2.6 basis points to 6.048%, a level it hadn't seen since Nov. 16. But the two-year Treasury note was unchanged at 100 1/32, its yield 6.480%.

At the

Chicago Board of Trade

, the June

Treasury futures contract rose 10/32 to 95 25/32.

Four economic releases this morning all presented bond traders with reasons to sell.

Inflation at the wholesale level, as measured by the

Producer Price Index

rose 1.0% in February, the biggest gain since October 1990. Economists polled by

Reuters

had forecast a 0.5% gain, on average. The report brought the year-on-year increase in the PPI to 4.0%, the fastest pace since January 1991.

But the more-important core PPI, which strips out volatile food and energy prices, rose only 0.3%. The average forecast was for a 0.2% gain, but a miss of that magnitude isn't a huge deal. And the core PPI is rising at just a 1.0% year-on-year pace. As recently as January 1999, it was rising at a 2.2% year-on-year pace.

Meanwhile, the February

housing starts

report showed a faster pace of new home construction than economists anticipated, indicating that the economy is refusing to slow despite higher interest rates. Housing starts accelerated 1.3% to a pace of 1.781 million from 1.758 million in January.

Two things mitigated the impact of that news, however. Multifamily housing starts, which are volatile, accounted for the entire increase. Single-family starts -- which tend to be more stable -- declined. Also, building permit issuance, a leading indicator of housing starts, dropped 8.0% to a 1.631 million pace.

Then, testifying to how difficult it is for employers to find workers, the weekly count of

initial jobless claims

dropped to a new generational low of 262,000, the fewest claims for unemployment insurance since December 1973.

Finally, the

Philadelphia Fed Index

surged to 25.0 in March from 13.3 in February. It had been forecast to rise very slightly, to 14.1. However a sub-index measuring prices paid by Philadelphia-area manufacturers retreated from 40.0 to 33.6.

The Treasury market's ambivalence to the news stemmed partly from the fact that the Treasury Department bought from dealers $1 billion worth of 30-year bonds issued from 1988 to 1991 in its second buyback operation in as many weeks. By taking securities out of circulation, the Treasury Department is using a portion of the federal budget surplus to pay down outstanding debt.

While there's no objective measure of how well or poorly a buyback operation went, market analysts said today's went more smoothly than

last week's. Last week, only a few dealers managed to offer securities at low enough prices to have their offers accepted, said Michael Cartine, Treasury market analyst at

IFR

(formerly

Thomson Global Markets

) in Boston. This time, a broader spectrum of about 10 dealers had their offers accepted, Cartine said.

Accordingly, fewer people were left holding securities they had expected to sell. "It's the market preparing itself better for the buyback, and not leaving players with as much of an overhang," he said.

In today's operation, the Treasury was offered $6.4 billion of securities, compared to $8.6 billion last week.

Treasury prices improved slightly immediately after the buyback results were announced at around 11:30 a.m. EST, "but they gave it up as stocks ratcheted higher," said Michael Gregory, senior economist at

Lehman Brothers

. "To the extent that bonds try to get some direction from stocks, a big increase in the Dow would ordinarily be negative. But a buyback would ordinarily be positive, so it was a bit of a wash."

Meanwhile, the long end of the market is in good shape technically.

"It's almost like you're supposed to throw the numbers out," said Michael Pianin, trader at

Fuji Securities

. "If you look at the

economic numbers there's nothing obvious why you would want to buy. But they did nothing to either dissuade people from staying with long positions or covering back short positions. It's almost a momentum thing. It's not trading on fundamentals, so if you're looking at fundamentals, you just might not do a trade. But if you're looking at technicals, they're saying to get long."

Economic Indicators

There were no other economic releases today. Tomorrow brings the

Consumer Price Index

and

real earnings

for February, and the preliminary

Consumer Sentiment Index

for March.

Currency and Commodities

The dollar weakened against the yen and the euro. It lately was worth 105.50 yen, down from 105.66 yesterday. The euro was worth $0.9709, up from $0.9672. 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

rose to $31.17 a barrel from $30.72.

The

Bridge Commodity Research Bureau Index

rose to 217.07, its highest level since May 1998, from 216.31.

Gold for April delivery at the

Comex

fell to $287.00 an ounce, its lowest level since early February, from $289.60.