The Fed left rates and its bias unchanged at the FOMC meeting on Tuesday (May 7). While the actions were not unexpected, the statement accompanying the announcement led bond investors to believe that the Fed might not be raising rates as quickly as expected. This helped lead Treasury yields down momentarily, although the week was treacherous in its daily volatility.

Economic news was sparse, although productivity figures were generally friendly for bond and equity investors alike. Even if one questions the actual 8.6 percent spurt in nonfarm productivity, there is no question that productivity has improved in the past couple of quarters and the trend for continued gains is hopeful.

These days, economic reports seem somewhat less important than they were last year or the year before. Actually, it isn't that bond and equity investors are not monitoring the data as closely as usual, it's just that they are ignoring the good news (but not the bad). Next week's set of reports could give us new insight on the state of the economy (retail sales, industrial production and housing starts), although it is also useful to keep in mind that the employment situation typically sets the tone for the month. The April employment report was on the soggy side.