The bond market did a bit of bouncing around today before settling on a downward trend, mostly due to the less-than-favorable productivity and unit labor costs report.

After weakening this morning, when first-quarter productivity figures were worse than the market wanted, the bond market rebounded, mostly because

Federal Reserve

Chairman

Alan Greenspan

kept his trap shut.

However, the market turned back around again, as people continued to adjust to the notion that the Fed will ultimately kick the fed funds rate, currently 6%, up 50 basis points, rather than the usual 25, at the May 16

Federal Open Market Committee

meeting. With the April

employment report

due out tomorrow at 8:30 a.m. EDT, traders were playing it safe, however.

"Clearly, people are on the defensive ahead of tomorrow," said Anthony Karydakis, senior financial economist at

Banc One Capital Markets

. "People are becoming increasingly convinced the Fed will move 50 basis points, barring softness in tomorrow's data."

The benchmark 10-year bond was down 10/32 to 100 12/32, boosting the yield to 6.446%. The two-year note was up 1/32 to 99 9/32, yielding 6.758%.

Productivity rose at a 2.4% rate in the first quarter, compared with a 3.7% expected increase, according to

Reuters

. Unit labor costs, meanwhile, rose 1.8%, compared with expectations for a 1.0% increase. The previous quarter's productivity figure was revised upward to 6.9% from 6.4%; unit labor costs were revised down to a 2.9% drop from an original 2.5% decrease.

The year-over-year trend in productivity growth is actually favorable, however. On a year-over-year basis, productivity is up 3.7%, strongest since the fourth quarter 1992. Fourth-quarter 1999 was revised higher, to 3.7%. Similarly, labor costs are rising at a 0.7% rate on a year-over-year basis, slowest since the fourth quarter of 1996.

"Overall, the

productivity numbers were generally a bit bearish," said Mike McGlone, vice president of trading at

Aubrey G. Lanston

. "Even with the revision, this generally was not good news...the reason we bounced was because Alan Greenspan did not hint at 50 in this meeting. That was the fear this morning and we didn't get that."

Federal Reserve

Chairman

Alan Greenspan

spoke at the

Federal Reserve Bank of Chicago

today, but his speech did not address the economy or financial markets and neither did the question-and-answer session that followed.

It's not quite clockwork, but often the Fed will let the market know it's planning on getting aggressive, or plans to raise rates, through a Greenspan speech. The chairman did this in June 1999, before they started the cycle of tightening, and in late 1999, when many thought they were done raising the funds rate.

Currently, it's a given to the market that the Fed is going to raise the fed funds rate at least 25 basis points. But while many are talking up the idea of 50 basis points -- and the bond market has sold off in anticipation to extra aggressiveness from the Fed, Greenspan hasn't warned that the Fed is going to act as such.

Karydakis, however, still believes the Fed is going 50 basis points. He thinks the recent economic data support such a move, adding, "the reason the Fed has moved cautiously so far is because inflation has remained generally well-behaved, until recently."

The market is looking forward to tomorrow's

release of the April employment report. A total of 358,000 in new nonfarm payrolls is expected, and average hourly earnings are expected to rise 0.4%. The unemployment rate is forecast to drop to 4.0% from 4.1% in March.

Currency and Commodities

The dollar fell against the yen and rose against the euro, which continues to act like the Edsel of currencies. It lately was worth 108.14 yen, down from 109.08. The euro was worth $0.8905, down from $0.8951. For more on currencies, see

TSC's

Currencies column.

Crude oil for June delivery at the

New York Mercantile Exchange

rose to $26.95 a barrel from $26.75.

The

Bridge Commodity Research Bureau Index

rose to 216.65 from 215.19.

Gold for June delivery at the

Comex

rose to $281.2 an ounce from $279.1 yesterday.