POLL-Most U.S. primary dealers see Fed trimming purchases in March 2014

Tuesday, 22 Oct 2013 | 2:58 PM ET

NEW YORK, Oct 22 (Reuters) - Most U.S. primary dealers polled by Reuters on Tuesday believe the Federal Reserve will not start cutting its monthly bond purchases until March of next year and said the recent government shutdown and standoff over raising the U.S. debt ceiling had a significant impact on the Fed's timing.

News that U.S. employers added far fewer workers than expected in September, suggesting a loss of momentum in the economy, only reinforced the view that the Fed's timetable for reducing the amount of Treasuries and mortgage-backed securities it has been buying to stimulate the economy is being nudged farther out on the horizon, in contrast to the once-prevailing notion that cutbacks would be announced in September 2013.

In the Reuters poll, nine of 15 dealers said they expected the Fed to begin tapering its purchases in March. Two dealers said they expected a tapering announcement to occur at the Fed's Jan. 28-29 policy meeting. Two widened that timeframe to the first quarter of 2014. One said cutbacks would be announced no sooner than January. One said the Fed would not announce cutbacks in its purchasing program until June 2014.

The 15 primary dealers polled offered a median estimate that the Fed would cut its purchases by $15 billion a month, a size unchanged from a Reuters poll of 18 dealers done in September.

Eight of the 15 dealers said the recent U.S. budget impasse and debt ceiling standoff had had a significant impact on the timing of the Fed's eventual tapering of its purchases.

Primary dealers serve as trading counterparties of the Federal Reserve Bank of New York in its implementation of monetary policy. They are obliged to participate consistently in open market operations to carry out U.S. monetary policy formulated by the Federal Open Market Committee (FOMC) and provide the New York Fed's trading desk with market information and analysis helpful in the formulation and implementation of monetary policy.

Primary dealers are also required to participate in all auctions of U.S. government debt.

(Reporting By Ellen Freilich; Editing by Nick Zieminski)