Trying to pick the direction of interest rates is an extremely hazardous occupation at this particular time. Any major change in the direction of interest rates is usually preceeded by mixed economic and financial signals.

In other words, the economic data today are beginning to show signs of a mild pickup in the economy, even though other data may be depicting a very sluggish economy. Similarly, the continued growth in the monetary aggregates and bank reserves should lead in time to an expanding economy. Yet the big question for bond buyers is when the surge in business activity will occur.

Unfortunately, so many variables affect the direction of our economy and interest rates that it is difficult to get a handle on any new trends. Domestic and international factors are involved. And bond managers trying to anticipate every move in the market are quick to react to any information. Under such uncertainties, bond markets have become very skittish.

We have been in such a market for the past several weeks, and the overall bias since mid-April has been toward lower bond prices and higher interest rates. The subtle price changes can be surprising over a period of time.

As yields have risen in the intermediate (4 years to 10 years) Treasury sector, distortions have resulted. In fact, yields are higher in the intermediate area than in the long-bond area. This is most unusual. With a 2-year and a 4-year T note scheduled for late June, upward pressure on intermediate rates could endure. As of Thursday, yields in the intermediate sector were greater than 8 percent, which afforded investors a buying opportunity.

And for those investors who own long taxable bonds and feel that interest rates could go up, the higher yields in the intermediate sector offer an area to move into. nts.