Treasury prices finished lower, with the longer-term maturities taking the bigger hit. Although equities were battered throughout the day, there was little sign of investments flowing toward fixed income. Rather, bond traders indulged in end-of-the-week profit-taking that kept the money market suppressed right up to the close.

The benchmark 10-year

Treasury note fell 8/32 to 100 15/32, raising its yield 3.4 basis points to 4.939%.

The 30-year

Treasury bond fell 7/32 to 100 23/32, raising its yield 1.5 basis points to 5.322%.

The latest jobs and business data released this morning indicated that the economy is not so weak as to warrant an intermeeting move on interest rates. Labor market conditions for February turned out to be better than anticipated, and wholesale business inventories decreased. Central bank officials have pointed to inventory reduction as a necessary first step toward economic recovery.

The market is once again focusing on the monetary policy meeting on March 20 as the earliest occurrence for interest rate cuts.

"We had a very good number come out today, and the job market should get better for the graduating college class in May," said Mike Franzese, intermediate government bond trader at

Zions First National Bank

, referring to the heartening employment figures. "The overall progress at present is very good for bonds, and we should see a 50 basis-point cut in interest rates in March," he added.

There has been talk recently that with the economy showing definite signs of improvement, and with most regional Fed presidents expecting growth to really pick up by midyear, the

Federal Reserve may back off from lowering rates for a time after its expected easing later this month. John Vail, chief strategist at

Fuji Futures

, also reasons that the central bank would rather not be forced to make cuts in half percentage-point increments, and might move by only a quarter point on the 20th.

For his part, Franzese estimates a 5%

fed funds rate to be the comfort level for the Fed right now. He also feels that Greenspan is doing a great job of managing the downturn. "I think Greenspan is not a markets Fed chief, meaning that he cares for the general economy rather than stock market valuations," he said.


Consumer Price Index


definition |

chart |


) for February, to be released later this month, will be significant in either adding or detracting from the mood that has settled on the investing community today, according to Franzese.

"In the longer term, though, we are in a U-shaped recovery. This trend is going to last for a while. The benefits of the interest rate cuts are not going to be apparent until July or August," he said.

Speaking in Rome last night,

Fed Vice Chairman

Roger Ferguson said that despite the resurgence in parts of the economy, some risks might still exist on the downside. He warned against "calling anything prematurely."

At the

Chicago Board of Trade

, the March

Treasury futures contract fell 7/32 to 105 23/32.

Economic Indicators

The much-awaited

employment report


definition |

chart |


) showed that the unemployment rate

held steady at 4.2% in February. Economists had forecast a 0.1% increase in the


poll. The real urprise, though, was in the number of new jobs created, which far exceeded expectations. At 135,000, it was lower than the revised number of 224,000 in January but 67,000 more than (indeed, almost double) the total that had been predicted for last month.

Average hourly earnings rose by 0.5% in February after having been flat during the prior month. Such wage increases are associated with inflationary effects, but Ferguson echoed the sentiments of Fed Chairman

Alan Greenspan in saying that inflation would not be a challenge this year.

The augmented employment report, which includes the number of jobless people who are not actively looking for work, showed the unemployment rate at 7.1%. This is unchanged from January.


Future Inflation Gauge


definition |

chart ), which anticipates the rise and fall in inflation, fell to 111.3 in February from 112.4 in the previous month. The index had a base value of 100 in the year 1992.

Currency and Commodities

The dollar fell against the yen and the euro. It lately was worth 119.51 yen, down from 119.74. The euro was worth $0.9326, up from $0.9322. For more on currencies, see


Currencies column.

Crude oil for April delivery at the

New York Mercantile Exchange

fell to $27.95 a barrel from $28.39.


Bridge Commodity Research Bureau Index

fell to 222.26 from 223.43.

Gold for April delivery at the


rose sharply to $271.50 an ounce from $266.10.