The Federal Reserve's lowering of the discount rate late Friday helped to improve what had otherwise been a dull market.

Professionals were beginning to focus in on the Treasury's $11 billion refunding that was announced Wednesday and will be auctioned this week. The municipal market had its usual large supply of housing bonds and did very little because there was nothing else for investors to zero in on. The same may be said for the corporate market, where there were just a few new issues.

At this point in the interest rate cycle, investors should be giving serious consideration to market strategy. The important question is, will interest rates continue to decline or will they move higher before the end of the year? There are compelling reasons to accept either side of the question, but since the answer isn't crystal clear, an investor should give serious thought to some maturity extensions just in case interest rates are moving permanently lower.

Quality should be stressed in whatever issue is purchased. And the length of your extension should be determined by the amount of principal risk that you can afford to take, just in case bond prices move lower.

Consequently, for those investors who wish to take advantage of the high real interest rates currently available, this week's huge two-part Treasury refunding will offer the opportunity. Further, Treasuries are exempt from state and local taxes but are subject to federal taxes.

On Tuesday, a three-year note will be sold in minimum denominations of $5,000. Investors who wish to stay in short maturities and maintain the highest quality and liquidity should consider this issue. Assuming short-term rates continue to fall, the yields on taxable money market funds, which are currently returning about 14 percent, soon will decline a couple of hundred basis points as they catch up with the much lower money market rates. With the three-year Treasury note probably offering a return of around 13 percent, the investor may switch from the money market fund into the note and lock up that yield for three years.

If an investor would like to lock up a high real interest rate for a longer period, the Treasury's 9 3/4-year note, which will be auctioned on Wednesday, should be appealing. The Treasury will reopen the existing 13 3/4 percent note due May 15, 1992. This issue will be available in minimums of $1,000, and will probably return around 13.30 percent.

Investors interested in these issues may purchase them in one of several ways. The simplest and least expensive way is to go directly to the Treasury in Washington or to one of the Federal Reserve Banks or their branches around the country--such as in Cleveland, Boston, Charlotte or Richmond. An individual buyer of $1 million or less should enter a noncompetitive tender, which allows you to obtain the notes at the average price or yield of each auction.

A purchaser also may write directly to one of these institutions, but a check for the full amount of the bonds to be purchased should be enclosed, and must be postmarked at least one day before the auction date. If the letter is sent to the Treasury in Washington, the check should be made out to the "Bureau of the Public Debt." Should the letter be sent to a Federal Reserve Bank, the check should be made out to the appropriate bank, such as to "The Federal Reserve Bank of Cleveland."

These notes also may be purchased through a brokerage house or a commercial bank, but a fee of up to $50 will be charged. No fees are charged by the Treasury or the Federal Reserve Banks.