A ray of sunshine filtered through the beleaguered bond markets during this holiday-shortened week. Psychology seems to be changing into a more favorable outlook, and as it did, interest rates become soft and fell noticiably.

Short-term, 30-day money market rates declined anywhere from 50 to 150 basis points. Two-year Treasury bills fell 90 basis points, 10-year T-bills fell 30 points and long Treasuries declined 30 basis points over the week. Lower agricultural prices and monetary aggregates gave the market a big boost on Friday.

The better feeling eminates from several basic factors. Recent economic data depicts the economy as slowing. Better inflation numbers have appeared and probably will occur near term. Some of the monetary aggregates (MIB, M2) are behaving more moderately now than they were in April and in early May. Finally, the Federal Funds rate (a barometer of the tightness of money in the banking system) has fallen from the lofty 20 percent of last week to the more reasonable 17 percent levels this week. All of these events have come together to lend a better tone to the fundamental background behind the fixed-income markets. As a result, interest rates fell. b

This is not to say that we are out of the woods yet. Far from it, but at least the doom and gloom that has been so pervasive has been lifted. The keys to this market now will be the money supply numbers, the economy and the size and timing of the tax cuts. These events will give direction to the market. But at least for now, investors and dealers are not as confident -- as they once were -- that this week's prices will be cheaper next week. Now for the first time in a long time the element of the doubt has been introduced and a decision has to be made in light of the improving psychology.

This week's new issues were well received, although the calender was relatively light. The new five-year-five-month Treasury was auctioned and returned an average yield of 13.95 percent. A week ago the market expected a 14 3/4 percent return or higher.

But corporate and municipal calenders should begin to build again, especially if rates continue to fall. Moody's Investors Service estimates that there are $18 billion of corporate bonds in registration, just waiting for the right time to be offered. The Treasury will be a less frequent borrower over the next few weeks, which is also beneficial to the market.

Because the market has moved so quickly, and there are sure to be reversals, individual buyers need not chase after the lower yields at this time. There are so many uncertainties, and the market is so volatile that other buying opportunities should arise. Also, buyers are still cautioned to remain in the three-to-five year maturity area.

On Tuesday, over a billion of government-backed (HUD), tax-exempt project notes will be sold. There will be a six-month and a nine-month maturity, which should return 7 percent 7 1/4 percent.

For purchasers of variable rate, tax-exempt issues, the Virginia Educational Loan Authority and the Higher Educational Loan Program of Washington, D.C. will offer issues this week. A floating-rate issues will be sold by Prince George's County for the Potomac Electric Power Company. In addition, there are several short, two-or-three-year tax-exempt note issues with 9 percent returns being offered. Your broker should have additional information concerning all of these items.