Treasury Asks Dealers About End To Operation Twist
First Published Friday, 13th April 2012 05:15 pm - © 2012 Dow Jones
--Treasury Department sets agenda for quarterly refunding meetings
--Fed's program to extend the maturity of its portfolio set to end June 30
--Fed policies have helped to keep interest rates low
WASHINGTON -- The U.S. Treasury Department is asking securities dealers what will happen to government bills, notes and bonds when the Federal Reserve's "Operation Twist" ends.
The Treasury's question was contained in the agenda, released Friday, for regular meetings with dealers ahead of the department's quarterly refunding.
In September, Fed officials said they would adjust the central bank's securities portfolio to hold more long-term government debt and mortgage bonds, a move dubbed Operation Twist. It is intended to spur spending and investment by making borrowing cheaper.
That program is scheduled to end June 30.
"Please comment on any impacts the end of that program will have on the Treasury market," the Treasury Department asked in the agenda.
Treasury Department officials have repeatedly said they operate fiscal policy independent of the Fed's monetary decisions. But the latest round of questions to dealers shows that the department is keenly aware of the Fed's efforts to keep interest rates low.
That, in turn, has helped the federal government to borrow the billions of dollars it needs each quarter at historically cheap rates.
In its usual drill held every three months, the Treasury also asked dealers for their latest economic and fiscal forecasts for fiscal-years 2012 and 2013. It asked whether the current auction schedule is well-suited to meet the Treasury's expected financing needs.
It asked also how increased use of electronic-trading platforms has changed trading dynamics and liquidity for Treasurys.
The meeting with dealers is set for April 26-27; the quarterly refunding will follow in May.
The last refunding was held in February, when the Treasury said it would issue $72 billion in new debt at its regular quarterly auction.
The Treasury sells bills, notes, and bonds to finance government operations and pay off debt. A refunding is a replacement of government debt, often debt that is about to mature, with new debt.