December 23, 1993

METRO DIGEST The Clinton Administration will propose a Federal budget for the next fiscal year that has a deficit "in the vicinity of $190 billion," the White House budget director said. Members of the House from the New York metropolitan area were already attacking the Administration's plan to phase out $800 million in annual mass transit operating subsidies, of which the New York area now receives about $100 million. A13. NEW YORKER TAKES HEALTH CARE POST President Clinton named Harold M. Ickes, a New York lawyer and Democratic Party stalwart, to be his deputy chief of staff with primary responsibility for orchestrating the health care campaign for the White House. A15. NEW YORK CITY

The Treasury market rallied sharply yesterday as strong demand at the auction for five-year notes and sudden buying interest from investors gave prices a lift on the last full day of trading before Christmas. The price of the 30-year bond jumped more than a point as the yield dropped to 6.21 percent. "I think there was some pent-up demand waiting to get past the auctions," said John Costas, head of government trading and sales at CS First Boston.

THE dark green Jaguar was on its weekend run from Fifth Avenue in Manhattan to the hills of Litchfield County. Behind the wheel, a woman with major cheekbones and a quirky European accent was talking about "Christmas in Connecticut." Not the 1940's movie in which a magazine writer (Barbara Stanwyck) and a war hero (Dennis Morgan) find love under the mistletoe -- not that celluloid chestnut.

The Pentagon issued new rules today intended to put into practice its new policy allowing gay men and lesbians to serve in the military so long as they do not engage in homosexual acts and keep quiet about their sexual orientation. The policy allows gay soldiers to acknowledge homosexual feelings but only if they can demonstrate that they are not engaging in homosexual behavior. Under the rules issued today, visits to gay bars would not bring about an investigation, but holding hands with someone of the same sex, even while off duty, could.

Neither rain, nor sleet, nor snow nor the depths of recession seems to shorten the queue of people shivering outside the F.A.O. Schwarz flagship store in Manhattan during the holiday season, awaiting a chance to wander through the closest thing to Santa's workshop south of the North Pole. The "toy" soldier standing at the main entrance salutes to more than 50,000 people each day at this time of year. Many are tourists who include the Schwarz store at Fifth Avenue and 58th Street on their itinerary in the same way they do the Empire State Building or the World Trade Center.