Second-quarter trading results will be better than previously thought at some money-centers, several analysts say.

Investor expectations of an imminent cut in interest rates has spurred a prolonged bond market rally this quarter, adding value to banks' securities trading portfolios.

At the same time, revenue from foreign exchange trading remained strong as corporations hedged their currency positions after the Mexican peso crisis earlier this year.

With two weeks left in the second quarter, "we haven't had the kinds of unexpected and significant moves in some markets that occurred in the first quarter," said Stephen Berman, an analyst with Natwest Securities Corp.

"We have had a good market to the extent that banks have been involved in trading global bonds."

Gary Schlossberg, an economist at Wells Fargo Bank in San Francisco, said the Federal Reserve could move to lower rates as soon as next month.

"With the information we've been getting, we think the Fed may be inclined to lower the fed funds rate by a fourth to a half of a percentage point its next FOMC (Federal Open Market Committee) meeting," he said, adding that the Fed may have a follow-up reduction later in the year.

But interest rates are not the only bright spot on the trading horizon. Charles Peabody at UBS Securities points out that currency risk has replaced interest rate risk as the top concern among U.S. corporations. And that means higher trading volumes - and profits - on the foreign exchange desk.

In a recent research report, he said that banks will benefit both as corporations take steps to hedge their currency exposure and, later, as those fears subside.

"The final source of strength is likely to occur in the quarter when a trend reverses and corporations unwind their hedges or downsize their speculative positions," Mr. Peabody said.

As a result, the analyst said he expects money-center banks to report improved foreign exchange trading revenues, at least through the end of the third quarter.

In particular, Mr. Peabody expects Chemical Banking Corp. to benefit from these trends in the foreign exchange market. Foreign exchange volumes have remained as healthy in the second quarter as they were in the first quarter, he said.

Ultimately, improving market trends are expected to combine to make a positive contribution to the bottom line for trading banks. And at some banks, the contribution could be significant.

Mr. Peabody estimates trading results at Bankers Trust New York Corp. will rebound from a $36 million loss in the first quarter to a contribution of as much as $35 million in net income this quarter.

While prospects for stronger trading profits are bright, however, no one is forecasting a return to trading's heyday of 1993.

"The way bank stocks have lifted, there seems to be certain expectations that we will see tremendous trading profits, as we did in 1993," said Diane Glossman, money-center bank analyst with Salomon Brothers Inc. "I don't think that is likely."

Some fixed-income analysts are worried about the volatility accompanying a heavy reliance on this form of income. On Wednesday. Moody's Investors Service downgraded the ratings on about $5.1 billion of Bankers Trust debt. Among other things, the rating agency cited the company's reliance on trading and client risk management for earnings.

Natwest Securities' Mr. Berman also advises caution. He said some banks got into problems in the first quarter because they did not realize the degree of risk they were carrying in their portfolios.

And in a business like securities trading, he said, one bad month could ruin a whole year.

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