The Treasury market easily devoured the record $15 billion quarterly refunding last week. Retail investors who were flush with funds eagerly sought the three- and 10-year notes, both in the auctions and then in the aftermarkets when the results of the auctions were known. Commercial banks and thrifts had money to put to work that had flowed into their money market deposit accounts and their super-NOW accounts.

Money was also available from the IRA accounts that had been established around the April 15 income tax deadline. Good foreign demand was also reported for the two notes as investors became convinced that interest rates would continue to fall and that the Federal Reserve would soon lower the discount rate--the rate it charges its member banks to borrow funds.

On Thursday, a sort of buying frenzy continued and the outstanding long bond, which was being reopened for investors, continued to climb. However, as the time came for buyers to put down their money at auction time, they backed away from the market and the long bond fell over 1/2 point from its highs. In effect, the market had gotten ahead of itself, running too far, too fast.

For the market to continue to do well, good money supply numbers, a lower federal funds rate, and then a lowering of the discount rate by the Fed are needed. The average returns on the new Treasuries were 9.48 percent on the three-year, 10.16 percent on the 10-year and 10.29 percent on the long bond.

Will interest rates continue to decline? Most economists believe that they will, but they question the extent of the decline.

Elliott Platt, Donaldson, Lufkin and Jenrette's money market economist, feels that rates could move lower, but he remains troubled by the size of the Treasury's borrowing needs. More specifically, Platt feels that the euphoria of this refunding has occurred during the low point of the Treasury's borrowing schedule, while at the same time, the Treasury paid off some $15 billion to investors as management bills matured.

Platt wonders what will happen during the week of May 16, when investors will not only have to pay more than $11 billion for new issues but also face a new calendar of Treasury issues. Unless the market receives some reinforcement from the Fed in the form of an easier monetary policy, he feels the market will begin to focus on the heavy Treasury financings and will stall out.

The 30-day calendar for municipals has risen to a sizeable $5.5 billion. Of this amount, 29 percent are public power authority issues and 32 percent are general obligation bonds. The move to lower interest rates should bring a host of activity in the corporate area as well. Both sectors will look to the Treasury market for direction. Consequently, a market ahead of itself and a large municipal calendar could produce attractive tax-exempt returns.

The quick drop in rates inspired corporate treasurers to quickly market $2.7 billion of their issues during the last two days of the week. Corporates are in such demand that the yield spreads have narrowed against Treasuries and make the Treasuries more attractive relative to the corporates.