Long-term Treasury prices posted small gains in hushed post-holiday trading yesterday as the market got some encouragement from falling commodity prices.

Late in the day, the 30-year bond was up 1/8 point to yield 7.50%.

A decline in commodity prices is a favorable sign for long-term bonds because it suggests inflation will improve.

The February West Texas Intermediate oil futures contract fell 47 cents yesterday, to $18.50 a barrel, and gold was off $4.35 at $355.05 an ounce. The Commodity Research Bureau index, which includes a variety of commodity prices, fell .62, to 209.29.

The head trader at one primary dealer said the lower commodity prices just reinforced the recent trend of improving prices at the long end.

"We're just sort of marching toward lower yields bit by bit," he said. "The long end had a bid to it all day."

Traders warned against reading too much into yesterday's change in prices because the improvement occurred in very thin activity.

"There's just so little going on, I don't think it takes a lot to move prices," a government note trader said.

President Bush said yesterday he would include proposals to stimulate the economy in his State of the Union Message in late January, but added that his suggestions would not violate the budget agreement. Traders said the President's comments did not affect Treasury prices.

The head trader said the market had already accounted for the prospect of a fiscal stimulus package in current price levels. "We've been talking about this for two months," he said.

Nor did the market react to the decline in weekly jobless claims reported earlier in the session.

The Labor Department said new claims for unemployment insurance fell 20,000, to 473,000, in the week ended Dec. 14, while the number of people receiving state benefits fell 138,000, to 3.3 million, in the previous week.

Analysts said the swings in claims in recent weeks showed how much holidays can affect the numbers.

The Labor Department also reported that 943,400 people applied for the extended unemployment benefits in the week ended Dec. 7.

The Federal Reserve added funds aggressively yesterday, intervening half an hour earlier than usual with seven-day system repurchase agreements. The funds rate was trading at 4 5/8% at the time, well above the 4% target, and economists said the Fed was trying to offset holiday pressures on the reserve system.

Today's trading is expected to be just as quiet as yesterday's.

The only indicator tomorrow will be the money supply statistics, which are usually released Thursday but were delayed this week because of the holiday.

The March bond future contract closed 9/32 higher at 103 2/32.

In the cash market, the 30-year 8% bond was 1/8 higher, at 105 24/32-105 28/32, to yield 7.50%.

The 7 1/2% 10-year note rose 5/32, to 104 18/32-104 22/32, to yield 6.83%.

The three-year 6% note was steady at 102 9/32-102 11/32, to yield 5.11%.

In when-issued trading, the 5% two-year note was unchanged at 100 9/32-100 10/32 to yield 4.83% and the five-year 6 1/8% note was steady at 100 15/32-100 17/32 to yield 5.24%.

Rates on Treasury bills were mixed, with the three-month bill unchanged at 3.82%, the six-month bill up two basis points at 3.91%, and the year bill one basis point higher at 4.00%.

For the week ending Wednesday, the federal funds rate averaged 4.22%, down from 4.49% the previous week, according to the New York Fed.

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