Interesting day out there. Too bad the bond market missed it.

The

Dow

came within shouting distance of 10,000 today, German Finance Minister

Oskar Lafontaine

resigned and the vast economic community is becoming more vocal over rising commodity prices. Bond traders, meanwhile, must have been watching the new

Star Wars

trailer on their screens.

GovPX

volume was reported down 38% today when compared with the average first quarter Thursday. The Treasury market's reaction to the above events was confined to knee-jerk selling, followed by short covering. Lately the 30-year bond was down 6/32 to trade at 95 12/32, yielding 5.57%.

Bonds may rally off tomorrow's release of the February

Producer Price Index

, which economists are predicting to come in at -0.1%. This week's economic releases, more specifically the

productivity and unit labor costs

revision, confirm the market's thinking that the

Fed

is on hold, at least for a few more months. The July fed funds futures contract closed unchanged at 4.86%, indicating roughly a 44% chance of a tightening by July.

"Bond yields are high enough so that people are comfortable

with these data," said Russell Sheldon, chief economist at

MCM Moneywatch

. "There's not a lot of risk that you'd be hurt at these levels without an inflation problem."

So if today's activity is any gauge, the market is pretty happy right where it is, which is why the market shrugged off the

retail sales

report. Overall, retail sales rose 0.9% in February; excluding automobiles, sales were up 0.6%. What's more, the January figure was revised upward to a 1% gain from an original 0.2%.

Fed Chairman

Alan Greenspan

commented Tuesday that "despite the tautness in labor markets, there have been no obvious signs of emerging inflation pressures."

"This is just more of the same, where we have super-strong economic statistics and still benign inflation," said Josh Feinman, global markets economist at

Bankers Trust

. "As long as that continues, the Fed stays on hold, and the bond market remains range-bound. This week is a microcosm of it: Tomorrow's PPI is widely expected to be benign. Interest rates can't move down with this growth but they don't have to move up either."

Knee-jerk selling also arose when Lafontaine resigned. He was the chief politician calling for the

European Central Bank

to cut interest rates in order to boost economic growth in that region. German bunds, as well as the euro, rose on the news, if only because it frees the ECB to make decisions that will not be viewed as politically motivated. The euro rose 0.009 against the dollar to $1.103 today.

"It was a bit of a currency play," said Michael Zentz, Treasury market strategist at

Fx Concepts

in New York. "If euro is up and the dollar is down, U.S. assets were less good-looking for those 30 minutes when all hell was breaking loose."

The price of April crude oil futures fell to $14.31 today, down from $14.69 yesterday, as oil producers continue to discuss production cuts. Oil prices have been slowly rising during the last month due to increased demand around the world, although the effect has not shown up in U.S. economic releases yet.