UPDATE 1-Fed balance sheet liabilities hit record $2.2 trln

(Adds analyst comments, more details)

NEW YORK, Dec 11 (Reuters) - Lifelines to banks, dealers and insurers and props to short-term funding markets have swelled the Federal Reserve's balance sheet liabilities to a record above $2.2 trillion in the latest week.

The data underscore the exposure of the Fed, the U.S. central bank, to the financial system amid the biggest global credit crisis in 80 years and banks' near-total dependency on the lender of last resort.

Total liabilities on the Fed's balance sheet rose to $2.245 trillion on Wednesday Dec. 10, from $2.121 trillion on Dec. 3, Federal Reserve data showed.

Over the long term, ballooning U.S. government support to the financial system and unprecedented Treasury debt issuance may send government securities yields spiking, market analysts warn.

"It's a question of timing when you start trading on the Fed expanding their balance sheet (and) put on some kind of medium-term sell bet on Treasuries," said Josh Stiles, bond strategist and managing director with IDEAglobal in New York.

Banks' overall borrowings averaged $240.59 billion per day in the week ended Dec. 10, down from an average $255.57 billion per day the week before.

Banks' primary credit discount window borrowings averaged $90.16 billion per day in the latest week, versus $90.33 billion the previous week.

Net portfolio holdings of the Fed's Commercial Paper Funding Facility which is buying three-month top-rated CP to free up this key area of short term lending, were $312.41 billion as of Dec. 10, versus $303.88 billion on Dec. 3.

Primary dealer and other broker dealer borrowings were $51.59 billion as of Dec. 10, versus $55.62 billion on Dec. 3.

"Other credit extensions", reflecting loans to insurer AIG, were $57.14 billion as of Dec. 10, versus $55.95 billion as of Dec. 3. (Reporting by John Parry; Editing by James Dalgleish)