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(March 25, 2002) FINANCIAL INSTRUMENTS: TREASURY BONDS--Bonds are looking weak on signs that the economic recovery is firming up. A number of recent economic reports have substantiated this with housing leading the way. The FOMC has shifted their recessionary bias to one of neutrality. After the last meeting the Fed. Acknowledged that the risk is balanced between inflation and weak economic growth but left interest rates unchanged.

On a cautionary note Mr. Greenspan seems a bit nervous still and probably does not want to raise interest rates too early in the recovery process. The housing sector has been, and continues to be the strongest section of the economy and happens to be one of the most sensitive to interest rates. Therefore the FOMC is very wary about hindering that growth. The next meeting, in May has the fed funds traders looking for an increase in rates, but this broker stands behind his prediction that the rates will remain the same until after the second quarter numbers are released.

This week Durable Goods and CPI are set for release Tuesday morning and new Home Sales are scheduled for Wednesday morning. Thursday the bond market closes early, at noon, and will remain closed Friday. During a short week like this you may generally anticipate the markets to be a little bit thinner as many traders take their vacations. Two different situations occur in these times, either a dead market results or wilder swings are induced. If the economic reports differ greatly than anticipated then usually the latter of the markets described is exacerbated so day traders should be wary of holding positions at these times.

RECOMMENDATION--Looking for the bonds to continue trading down. However, wanting to play it a little safer I would buy the NOB spread. That is, buy the ten-year notes and sell the 30-year bonds right here and hold till next week.

J.B. Siewers III

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