The bond markets ebbed and flowed aimlessly last week as participants tried to determine the direction of the economy and, concurrently, interest rates.

As mixed economic signals continued to surface, some markets grudgingly gave up part of their recent gains. This was not true of the money markets, however,

The money market area is composed of short-term instruments with maturities of a year of less. It is a very liquid market in which Treasury bills, commercial paper, bankers acceptances, domestic certificates of deposit, Euro CD's and agency discount notes are traded. This market sector is greatly influenced by the activities of the Federal Reserve and, consequently, by the Federal Reserve and, consequently, by the federal funds rate (the interest rate that banks charge each other for the use of their free reserves), which the Fed manipulates through its market operations.

Actually, in the recent rally, the money market area led the way, and long rates stopped declining two weeks ago, short rates continued to fall.

The paradox is that short rates are declining in the wake of a strong demand for credit.What has happened is that banks are using different sources of funds to finance their credit expansion.

Since the first of the year, they have allowed $16 billion of their certificates of deposit to mature. These funds naturally seek other short-term investments. The commercial paper market, with a record volume of $96 billion in borrowings, was a good area for those released funds to settle and help temper a rate rise.

Similarly, $12.5 billion in Treasury cash management bills matured last week. These funds also were seeking other short-term investments and helped to push the rates on other money market instruments lower.

In time, this situation will correct itself, and short rates should move higher. So if you are a short-term investor, keep your maturities short until the rate correction occurs. Then lengthen to the most attractive rate within your horizon.

Because the long market has declined about 50 basis points, don't buy long-term bonds. If you want to extend, go into the 8-year and 10-year area. Your yield pickup is negligible for extending an extra 10 to 15 years.

The new-issue market was lackluster last week. The Treasury sold a 2-year note with an average return of 9.22 percent and a four-year note with an average rate of 8.89 percent.

Three B-rated corporate issues sold with returns of 11 1/2 percent to 13.586 percent. A quality intermediate issue, American Savings and Loan Association, sold with a 9 1/2 percent return.

In the municipal market, only the triple-A Washington Public Power Authority sold well. Dealers' inventories continued to grow, especially in general obligation bonds. Some price-cutting should be forthcoming.

The Treasury will offer a 15-year bond on Wednesday in minimum denominations of $1,000. A price guesstimate would be 8.95 percent to 9.05 percent.

The Federal National Mortgage Association will offer three issues through a nationwide syndicate of banks and brokers. The issues will be due in October 1982, July 1984 and July 1987, and price guesstimates would be 9.20 percent on the '82, and 9.25 percent on the other two. These issues will come in minimum denominations of $10,000 in "book entry" form only, no physical delivery. Check your brokers.