NEW YORK, FEB. 19 -- The federal judge who sentenced junk bond financier Michael Milken to 10 years in prison said today she expected that he would actually serve at most one-third of that time behind bars and that he might be released on parole after as little as two years.

U.S. District Judge Kimba Wood's statement at a hearing -- and revelations there about a report on Milken's case by a U.S. probation officer -- suggested strongly that Milken will serve significantly less time in jail than was widely expected at the time of his sentencing in November.

Milken is now expected to be paroled after 24 to 36 months, under a complex formula based in part on the probation officer's finding that the total financial damage caused directly by the crimes that Milken admitted was $685,614.

"It's clearly good news for Milken," a source close to the defense team said. Noting that it was anticipated when Milken was sentenced that he would serve about two-thirds of his sentence -- or six years, eight months -- the source said the judge "basically has cut that in half."

Milken is appealing the sentence but still is scheduled to surrender to federal authorities on March 4 to begin serving his time. He pleaded guilty to six financial market crimes and paid $600 million in fines and other penalties in the biggest securities fraud case in Wall Street's history.

The U.S. Parole Commission will determine how much time Milken actually spends in jail. But the commission is very likely to follow longstanding, complex precedents, which set a release date based on the amount of financial damage caused by the crimes, the convict's past criminal record and other factors, according to defense lawyers and law professors.

"I would think that with the U.S. Parole Commission applying its standards, he'll probably be out in somewhere between 24 and 28 months," said David H. Berg, a Houston-based criminal defense lawyer who specializes in white-collar cases.

Under parole commission standards, the parole date for a white-collar criminal like Milken is influenced heavily by the amount of money bilked from victims in his crimes. In Milken's case, the probation officer calculated and Wood agreed that the total was greater than $200,000 but less than $1 million, which would imply an actual prison term of between 24 and 36 months. Wood estimated the direct cost of Milken's crimes at $318,082.

If the total had been greater than $1 million, as the government sought unsuccessfully to prove, the implied jail time would have been between 40 and 52 months.

Wood, who said she had imposed the 10-year sentence on the expectation that Milken would then be paroled after 36 to 40 months, noted that the public may be surprised by the finding that Milken's crimes caused such little direct monetary damage.

"I recognize that anyone taking a quick look at this case may well simply assume that more than $1 million in losses must have occurred from the defendant's crimes," Wood said.

She went on to emphasize, however, that criminal penalties must be based not on "speculative testimony given by economists," but only on figures that are "readily quantifiable."

In the six crimes to which he pleaded guilty -- of about 100 that the government originally brought against him -- Milken admitted that he had rigged corporate takeovers, cheated clients and assisted in tax evasion. But the sums involved were relatively small for a man who became one of the most powerful financiers in U.S. history through his promotion of the risky, high-yielding junk bonds that financed most of the 1980s corporate takeover boom.

Milken's critics -- especially the U.S. government, which prosecuted him -- have said that his swindles, by corrupting the financial markets, did damage far beyond their immediate impact in dollars-and-cents terms. "There might not be a great financial loss {in Milken's crimes}, but they can be quite severe because of the breach of public trust that they involve and their impact on securities markets," said Harry First, a professor and expert on business crime at New York University's law school.