Like last week, the bond market is following the rough trading seen in the stock market. Around 09:00cst {10:00est, 15:00gmt} the stock market recovered off its morning lows and moved into neutral territory. Bonds followed suit and moved to only a small amount above yesterday’s rate close. The 10-year Treasury is currently +.001% to 4.518%.

There is only one economic item this morning, the ISM-Services. It was predicted to be 57.0 to 58.0. The Institute of Supply Managers reported the non-manufacturing portion of the monthly numbers at a lower than expected number at 54.3. This should have moved rates lower, and did, but only temporally.

TOMORROW, 06 MARCH 2007.

Tuesday does open with an important economic item; the productivity report. This quarterly report includes both Production and the Unit Labor Cost Index. Production is forecast to be 1.5% to 2.0% growth. The Unit Labor Index is a very important part of this number. It is a good indicator of the wage-price-spiral. [The wage price spiral can create run-away inflation. As wages go up, prices go up. As prices go up workers look for higher wages to make up. As those wages go up, prices go up.] Unit Labor Costs are expected to be +3.0% to +3.6%.

We are neutral on locking V floating.

Steve Boxmeyer [612] 799 – 6858
steveb@LendWithIntegrity.com