Traders expect minimal activity this week as the market slouches toward the end of a year many would rather forget.

Reid Smith, an assistant vice president at the Vanguard Group of Investment Companies, said "exhaustion" is the word that best characterizes 1994, adding that the market has weathered storms from a variety of fronts. "The Fed, the rate hikes, the market discount rule, the Orange County fiasco, they're all just sort of piled on top of each other to lead towards a very frustrating year for a lot of people," he said. "The market sort of just wants to get the heck out of [this] year, and start a new year."

Smith was referring to the Fed's six hikes in short-term interest rates this year, a 1993 federal budget provision triggered by this year's higher rates that changed the way gains from the sale of some secondary bonds are taxed, and the blowup of former Orange County treasurer-tax collector Robert Citron's financial strategy, which has resulted in $2.02 billion of losses in Orange County's investment pool.

Looking ahead to 1995, MuniView figures show a total of $30.1 billion of debt exiting the municipal market in January, slightly less than this month's $30.7 billion total. Those figures include refunded bonds, maturing bonds, maturing notes, and coupon payments.

Smith said that from what Vanguard could see, institutional buyers have already been shopping in anticipation of the cash they expect to receive.

"We think a lot of that buying has occurred over the past two weeks -- people buying forward, at least in terms of institutional buying," he said. "I don't think that mom and pop have necessarily been buying yet."

Unlike many other funds, Vanguard does not expect to be deluged with cash in January, Smith said.

"We are probably unique among fund groups in that we have actually rolled out of poor call protected bonds for a number of years," Smith said. "Consequently, we do not have a heck of a lot coming in here other than our normal coupon that we get that coincides with January 1."

The portfolio manager said the coupon amount is not significant. "We already have looked at deploying purchases against that," he added.

Smith manages several funds for Vanguard, totaling roughly $2.9 billion.

As for this week's economic data, Kevin Flanagan, a vice president and financial economist at Dean Witter Reynolds Inc., said Friday's Chicago Purchasing Managers Index is "definitely" the report to watch.

"In terms of the economy, that will be our first glimpse really of the month of December, of any magnitude anyway," Flanagan said.

"So there is a chance you could get some kind of a reaction in a knee-jerk fashion to this," Flanagan said, adding that the report's prices paid component will be watched closely.

"Fed chairman Greenspan has reiterated time and time again that he would like to look at more forward looking indicators, [and] reports such as these fall into that category," he said.

As a result, the report could help determine what action the Fed takes at the next meeting of its policy-making Federal Open Market Committee, Flanagan said.

The next FOMC meeting is set to begin on Jan. 31.

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