Sure as spring is in the air there are signs of life and movement in the bond market. There is a feeling of anticipation -- perhaps just a thought of interest rates peaking.

In fact the various events necessary to slow down credit expansion, the growth of the economy and, hopefully, inflation are falling into place. High interest rates and the restriction of credit by the Fed are beginning to be felt. The silver crisis is a point in fact. The drop in the stock market, falling commodity prices and the curtailment of homebuilding are all signs that the Fed's program is working.

The final drama is being played out in the short-term credit markets, where rates have been spiraling upwards for several weeks. In this arena we have interest rates that reflect the tightness in the banking system -- the federal funds rate (the interest banks charge each other on loans of their free reserves); the cost of funds to banks -- certificate of deposits, Eurocertificates of deposit, Eurocertificates of deposit and re-purchase agreement rates, as well as the federal funds rate; the cost of money to coporations -- commercial paper rates if borrowed in the open market or the prime rate if borrowed from banks; and Treasury bill rates -- when the government borrows through the money market.

The second quarter of the year is always one of strong seasonal credit demands. Currently corporations can borrow cheaper in the commercial paper market than anywhere else. However, until the paper rates rise to the level where it is unprofitable to borrow or to the level where weaker credits cannot obtain money, the final squeeze will not occur. At some point many of these corporations will be forced to go to the banks to borrow. From the Fed's restraining actions all will come to a near halt and rates will peak. We still have a month or two to go, and there could be come additional crises during that period.

It is quite possible that we will see a spring rally because the markets are in good technical position. That is, there are few new issues and little secondary merchandise.

Last week bond prices rose, but so far it has been mostly dealer-to-dealer activity.

For the investor it would be wise to extend a portion of reserves to lock up some higher rates. Investors will be slow to return to the longer maturities, but many attractive isues are being offered in the 2- to 10-year range and should be considered.

Last week Federal National Mortgage Association offered a 2-year debenture to return 15.30 percent and a 4-year debenture to return 14.25 percent. Ford Motor Co. offered a 5-year not at 14 3/4 percent, and a 10-year note returned 14 1/4 percent.

The New York State short-term tax exempt TRANS issue did not sell last week because the governor and the legislature have not finalized the budget. It should be offered this week. A price guesstimate would be 10 percent or cheaper.

The Federal Farm Credit Bank will price three bonds on Tuesday. They will come in minimums of $1,000 in book entry form only, meaning no physical delivery. Price guestimates are 13.95 percent for the 3-year bond, 13.95 percent for the five-year bond and 13.25 percent for the 8-year bond. Check your brokers and banks if you have an interest.