The Treasury Department said on Friday it will be seeking comments from bond dealers on the impact its purchases of mortgage-backed securities will have on fixed income markets.
According to a person familiar with the agenda for a January 28 meeting with primary dealers ahead of the Treasury's quarterly refunding announcement, the department will also ask what impact the end of the purchases, slated for the first quarter of 2010, will have on financial markets.
The department is scheduled to make its quarterly announcement on debt policy and provide details of major securities auctions on February 3.
The department plans to ask for comments on the impact the Treasury Market Practices Group's fails charge has had on debt repurchase and cash markets. The fails charge has been in place for nearly nine months.
The repurchase, or repo, market is the most important source of funding for Wall Street traders in the fixed-income markets. A repo trade fails when a dealer does not return a security like a Treasury to another player on time.
The fails have come down significantly so I think that from our end we've been very pleased with how it's gone, the source said. A lot of the problems in the repo market have cleaned up.
The source also said the congressionally set ceiling on U.S. debt of $12.394 trillion could be reached in early March.
Publicly held U.S. debt subject to the ceiling stands at $12.271 trillion, leaving a $123 billion cushion for Treasury borrowing, according to the January 20 Daily Treasury Statement.
The Senate began debate on the debt ceiling this week and Democrats hope to raise the limit by $1.9 trillion. If the Senate votes to do so, allowing the United States to keep borrowing, that amount may last into 2011, the person said.
(Reporting by Nancy Waitz, Editing by Chizu Nomiyama)