"The people who believe that a recession is imminent are controlling the market. They are buying bonds and forcing interest rates down. They are hedging their bets and are getting bond programs on the books."

That statement by a manager of a large municipal bond fund describes the activity in the bond markets last week. Concern that the increase in oil prices would push an already weakening economy into a real recession fueled continued buying of many new bond issues.

However, by Thursday, the bulls and bears were locked in a see-saw fight. The markets had come a long way, and both the buyers and dealers were trying to assess what had shaped the market during the week.

The overall news for bonds was bad. With inflation still running at 13 percent during May plus a widening of our trade deficit, the markets should have sold off. But the recession fears won out and, as a New York bond salesman said,

"There was buying momentum; people wanted to own paper."

The treasury market, spurred by a shortage of bills, moved to higher ground. The 15-year bond sold at a average yield of 8.81 percent The 6-month and 9-month Farm Credit issues sold out on a 9.60 percent basis.

Two billion dollars of FNMAS sold out quickly with returns of 9 percent in 1982, 9.05 pecent in 1984 amd 9.10 percent in 1987.

Several large municipal loans moves slowly. There were buyers for the 7 percent merchandise and for the quality general obligation issues. But the Blue List, the trade journal of municipal dealers' inventory, remains at a high level of $1.2 billion.

The coporate market saw more lower-rated issues marketed last week. These "junk bonds," usually rated B or double-B, have found ready buyers from "junk bond" funds and from individuals who are willing to accept the credit risk for the 11 1/2 percent to 12 3/4 percent returns.

The $300 million Pacific Telephone issue was only about 75 percent sold by week's end. It returned 9 3/4 percent to investors.

This week should be a quiet one, with the Fourth of July falling on Wednesday. The new-issue calendar is so bare that firms probably won't bother sending them out this week.

However, there is merchandise around. A large amount of Pacific Telephone bonds remains unsold. Dealers still own a lot of the new Treasury 15-year bonds, and the Blue List is extremely large.

Unless the Federal Reserve validates the recent market gains by easing credit, the bond markets may have a difficult time holding their gains.And I do not think the Fed is about to ease credit at this time.