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(March 11, 2002) FINANCIAL INSTRUMENTS: TREASURY BONDS--Bonds certainly have followed through on the break of last week's bull trend line, drawn from the December low. Reasons generally given for the full scale follow through focus on the recent spat of economic data made available by our government. Friday's unemployment report, Monday's wholesale inventories and sales Report both helped paint a picture of economic recovery that was proceeding at a faster pace than expected. This in turn has led to fears of the Fed tightening at the next FOMC meeting (i.e., raising interest rates to combat inflationary pressure). The employment report released Friday morning came in better than expected with a decrease of .1% in the unemployment rate at 5.5%. The number of jobs gained last month was reported as 66,000, which was the largest gain in over a year. The unemployment figures are generally a lagging indicator, meaning the economy normally, when rebounding out of a recession, does not create jobs until the powers that be are convinced that the recession is over. This figure, if followed with similar figures next month, would indicate that the recession is indeed over. Some individuals are discounting this figure due to the unusually good weather in January, which would tend to pad the jobs figures.

Monday's report on wholesale inventories showed that they were down for the 8th consecutive month. This combined with wholesale sales figures that are the highest since last June, are a good sign that the economy has room to expand in the case of the former and is already on its way in the latter case. Both results could add pressure to the inflation worries at the Fed. I am of the opinion that the FOMC meeting march 19th will produce no more than a wording of equal risk to the economy. In other words, the Fed will stay on the sidelines with a neutral stance and no bias. The next couple weeks should see the bonds fluctuating between 100-00 and 98-00 as players jockey for position ahead of the FOMC.

RECOMMENDATION--Try to play the previously mentioned range. Sell the June 30-year bond at 99-24 and buy in the 98-08 range.

J.B. Siewers III

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