Last week's Memorial Day observances kept the market quiet, and little new merchandise was offered.

The economic news continued mixed but the widened trade deficit had an adverse effect on an already dull market. Treasuries especially sold off as concern about the dollar was rekindled in the face of high inflation and balance of payments problems.

By the end of the week, dealers had acquired some inventory. As buyers resisted the higher price levels some dealers began to lighten up on their holdings, which helped to push prices lower.

It would appear that the recent rally had run its course and a harder look at the fundamentals had deflated a further price rise. There also were ominous reports that the Organization of Petroleum Exporting Countries will raise the price of oil to $25 a barrel by the end of the year. The ability of savings and loan associations to offer variablerate mortgates and the increase in passbook saving rates will have raise the prise of money despite the good intentions behind these changes.

Also important is the banking system's ability to extend credit by obtaining money through the issurance of Eurocertificates of deposit. But the banks are not required to hold any reserves against these CDs, and the end result is a continuous unchecked growth in credit and the money supply.

All of these factors bode ill for the economy because they mean that inflationary problems will persist.

During 1974 and 1975, many investors purchased high-coupon, high-yielding corporate bonds. The great majority of these bonds had 5 years of call protections, that is, the bonds could not be called from the owner for that period. That call protection either has expired or is close to expiring. It now would be wise to sell these old bonds and to purchase new issues with the fresh 5-year call protection.

The corporate calendar has begun to build significantly so many opportunities to extend call protection will be available.

This week will offer a good test for the new levels in the municipal market. Several large quality loans will be sold, including offerings by the States of Ohio, Illinois, California and New Jersey.

Federal National Mortgage Association will offer three issues on Wednesday totalling $2 billion. The 1983 and 1984 issues should return about 9.3 percent, while the long 1989 issue should return about 9.25 percent. Check with your broker or banker for all the details.