WASHINGTON The U.S. Treasury said on Friday it is asking primary bond dealers for their views on the Federal Reserve's liquidity measures and a backstop plan for housing finance giants Fannie Mae FNM.N and Freddie Mac
"Treasury would like your views on the impact of these actions on credit market conditions, and in particular, your perception of market liquidity and the potential implications for Treasury debt issuance," the department said in the regular quarterly debt refunding survey that it sends to the 18 primary government bond dealers.
The Treasury survey also included questions seeking dealer views on the best way to change auction sizes, securities or coupon frequencies to achieve its objective of the lowest financing costs in coming years.
U.S. borrowing needs are expected to increase due to slowing revenues, tax rebates to stimulate the economy and continued spending growth. The White House budget office is expected to update its fiscal 2008 deficit forecast later this month.
The Treasury will discuss these subjects with dealers on July 24 and is expected to announce its borrowing needs for the next quarter on June 28. It is scheduled to announce the quarterly refunding plans for 10-year notes and 30-year bonds on July 30.
The Treasury and Fed last Sunday announced proposals to provide unlimited access to liquidity and equity capital for Fannie and Freddie to allay investor concerns over the viability of the two government-sponsored enterprises. The plan is being debated by Congress as part of a broader housing rescue bill.
The survey also seeks views on the various Fed liquidity measures enacted over the past several months, including the Term Auction Facility and the Primary Dealer Credit Facility, which made Fed loans available to Wall Street investment banks following the collapse of Bear Stearns & Co. BSC.N
A senior Treasury official said the Treasury wanted views on the impact these facilities have had on market dynamics for Treasury securities, adding that previous feedback on the measures has been "very favorable."
The pending sale of Bear Stearns to JP Morgan Chase & Co (JPM.N) reduces the number of primary dealers to 18, according to the New York Federal Reserve Website: here
(Reporting by David Lawder, Editing by Dan Grebler)