Dullness and uncertainty characterized the debt markets last week. New issues were sold but at higher levels than the week before. Older municipal issues were cut in price to facilitate sales.

The uncertainty was caused by continuing international problems as well as a mixture of economic news.

Bearish news such as the sizable increase in durable goods orders along with a widening of the trade deficit ended any chances that the markets would do better earlier in the week.

However, by the end of the week, the government had announced that the leading economic indicators were down for the third month in a row. Officals were quick to point out that the sizable declines in money supply since November had caused "substance distortions" in the indicators. Lastly, the money supply for last week was down again.

It would seem very possible for the technical factors to take over at this stage because the new issue supply is nominal over the next few weeks. Bonds easily could rally here.

At this point, it would be useful to point out the two schools of thought that exist on the direction of bond rates.

The bullish scenario says that rates are quiet near the top and that the move toward lower rates is close. The key to both scenarios is economic growth. This bullish position believes that the economy is slowing down. Consumer spending will be curtailed for various reasons (higher prices, excessive indebtedness) and the economy will slow. Because of this, the Federal Reserve will not need to raise interest rates further.

This position also points out the good performance of the dollar through the past two weeks of bad news and concludes that now is the time to buy quality long-term corporate bonds because rates soon will be falling.

The bearish scenario holds that rates will continue to rise through the second and third quarters or perhaps into 1980. Again the economy is the key, and continued strength is foreseen after the winter weather setback.

Continued growth of inflation is envisoned, with rising food and commodity prices leading the way.