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(March 18, 2002) FINANCIAL INSTRUMENTS: TREASURY BONDS--Bonds dropped almost 6 whole points in the last 3 weeks. I think it will take some time out of the free fall to consolidate. It's a given that the market will be watched closely by all those involved in the markets, since the FOMC meeting starts Tuesday. It's fairly well accepted that no interest rate moves are forthcoming and the consensus is for the all-important wording to indicate a neutral stance. The fed funds however are placing a 75% chance of a rate increase in the May meeting.

Helping drive the 30-year Treasury bond down was the large corporate debt issuance last week. G.E. placed 11 billion dollars worth of debt on the market and the rapidly rebounding economy had many major funds shifting out of the relative safety of Treasuries and into the corporate issues with their higher interest rates.

Economic reports due out this week on Housing Starts on Wednesday and Leading Economic Indicators, Consumer Price Index and Real Earnings Thursday will be a bit late for the FOMC to evaluate for this week's meeting. But, that won't stop the bond market from making rapid movements on any large disparity between the expected results and the actual results. If you are day trading those days be aware what times they are supposed to be released.

RECOMMENDATION--Look for a sideways market early in the week then a casual drift downwards later in the week as the FOMC and government's reports are digested. I think selling bonds at 99-19 and looking to buy them back later in the week at the 98-16 level makes sense.

J.B. Siewers III

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