NEW YORK (CNN/Money) - Bonds fell slightly but then recovered after Federal Reserve Chairman Alan Greenspan's appearance before Congress.

The dollar was down.

Greenspan told the House Financial Services Committee that he was confident about the economy's overall growth despite inflationary pressures in energy and labor costs. His optimism made it less clear to traders how much more the Federal Reserve would raise interest rates.

The benchmark 10-year note gained 4/32 of a point to 99-21/32 to yield 4.17 percent, and the 30-year bond gained 18/32 of a point to 115-1/32 to yield 4.39 percent. Treasury prices and yields move in opposite directions.

In shorter-dated bonds, the five-year note was unchanged at 99-16/32 to yield 3.99 percent, while the two-year note was down one tick to 99-16/32, yielding 3.89 percent.

Short-term debt is more sensitive to interest rate changes.

Greenspan tempered his optimism about the economy, notably when he said it was unclear whether favorable trends in labor costs would continue. Bond traders watch for indicators of widespread wage increases, because raises could potentially drive inflation.

The Fed has raised its overnight lending rate, the Fed funds rate, nine times since June 2004. The steady pace of rate hikes has been an effort to check inflation, which is unfavorable to bonds because it erodes the value of the fixed-interest paying investment.

The only economic data of the day was the weekly mortgage market index from the Mortgage Bankers Association, which rose based on an increase in refinancing.

The dollar fell against the euro and the yen.

The euro bought $1.2163, up from $1.2036 late Tuesday, while the dollar bought ¥112.70, unchanged from the previous session.

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