*** NY Fed is set to.........>

US TSYS/OVERNIGHT REPO: *** NY Fed is set to release Jan/Feb bill buying & repo

schedule today. No timing given. (The last announcement was around 1500ET.)

- Expectations firmly for Fed to maintain $60bln in monthly bill purchases, and

$20bln in monthly reinvestments on account of MBS portfolio paydowns.

- Size of overnight and term repo ops max sizes expected by many to be reduced

slightly now that end-year crunch is over. O/N currently $120bln, Term $35bln.

- Also possible O/N ops frequency gradually reduced from daily at present; Term

ops less often too i.e. 1 per week (vs 2x weekly).

- General expectation is broadly for O/Ns unch/$100bln; Term unch/$25/$30bln.

Wrightson ICAP say Term to $30bln "would not be a major constraint".

- Despite discussion of buying coupons in Dec FOMC minutes, analyst expectations

are that this would not happen until Mar/Apr (by when purchase program is due to

slow), and perhaps only if liquidity problems seen in bill market.

- Re possible increase in O/N repo minimum bid rate (from 1.55%): NatWest says

would be "direct way" for Fed to reduce footprint in repo market (compared other

methods like reducing max size); ICAP does not expect changes.