On the heels of an unusually quiet May, the junk bond market rallied late last week, offering banks that underwrite these bonds the faint hope of an active new-issue calendar.

After the release of employment data that signaled the economy has begun to slow, perhaps enough to spell an end soon to the Federal Reserve's monetary tightening, stock and bond markets, with high-yield included, rallied Friday. "If the high-yield market continues to rally, then [Friday's activities] could be meaningful, and you'll see new issuance," said Tom Haag, high-yield portfolio manager at Lutheran Brotherhood in Minneapolis.

May's junk bond deal volume for new issues reached its lowest point since March 1995, according to Thomson Financial Securities Data. Only 23 junk issues went to market last month, for a total of $1.8 billion. A year ago May 74 issues came to market, worth $16 billion.

Despite a few days' pickup in the market, an onslaught of new deals is still quite a way off, analysts said. To begin with, last week's rally must continue.

"After three subpar years I think I have grown a bit tentative about predicting huge rallies in the high-yield market," said Thomas White, head of fixed-income sales and trading at Banc of America Securities.

That said, "there's certainly a sense that a good deal of bad news is behind us."

Mr. White said a perception that the Federal Reserve is nearing an end of its interest rate increases is one good sign. And besides affecting the overall bond market, a rally in Treasury securities should make junk bonds more attractive to one group of investors - collateralized bond obligations - that have been staying on the sidelines in recent months, he said.

Peter Acciavatti, who runs high-yield portfolio strategy and research at Chase Manhattan Corp., agreed that the Fed's course holds the key. "Once Federal Reserve Board intervention is out of the way, it will open up the market to investors," he said.

In addition, bankers hope the recent slowdown in new issues means that money managers should have had time to refill their coffers, which have been depleted as investors switched more of their savings into stock funds from higher-yielding bond funds.

But "even that's not enough to portend a large new-issue calendar," Mr. Haag said. In recent months he has been buying bonds in the secondary market, where even the larger, more liquid names have been going cheap, he said.

Underwriting and trading junk bonds, which gained celebrity status with the help of people like Michael Milken in the 1980s and were a revenue sweet spot for investment banks, lost some luster with the tech-crazed equity markets.

And though it was the starter for the capital markets activities of commercial banks, companies like Chase, Bank of America Corp., and First Union Corp. have been aggressively adding other high-return capabilities, like merger advisory.

As an asset class in which firms deal, junk bonds "don't stand out in quite the way they used to," Mr. White said.

So analysts who follow the banks and brokers with large high-yield groups say that while revenues from this area may have slowed, it is secondary to a slowdown in what has become a more important area of capital markets - equities underwriting.

Lawrence W. Cohn, an analyst at Ryan, Beck Southeast Research, said the shriveling junk bond market is "really just one more indication of a sloppy quarter.

"There's no one out there that depends on junk bonds for a source of revenues," he said.

For high-yield underwriting, the stock market's woes should spell a rosy future. Even if stocks continue to rally, Mr. White said, he expects some investors who lost money when the Nasdaq went into freefall to switch into high-yield bonds.

Helen Stock contributed to this report.

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