* Market awaits outcome of Fed's policy meeting
* Fed expected to rebalance portfolio
* Rebalancing to favor longer-dated Treasuries
* Greece seen frontloading austerity to get crucial loan
By Ellen Freilich
NEW YORK, Sept 21 (Reuters) - U.S. Treasury debt prices
held steady on Wednesday as markets waited for an afternoon
statement from the Federal Reserve, one expected to indicate
the central bank would rebalance its portfolio in favor of
longer-dated securities to keep long-term interest rates low.
Fresh developments in the European debt crisis seemed to be
neutral for safe-haven U.S. government debt. Greece is expected
to outline more austerity measures to get a loan it needs to
avoid a cash crunch next month, but anti-austerity strikes by
Greek workers are called for October 5 and 19.
Stocks .SPX.IXIC.DJI opened mixed.
Anticipation of a Fed decision to ease monetary policy
further has made investors extremely reluctant to sell
Treasuries, at least ahead of the announcement.
In early dealings, benchmark 10-year Treasury notes
US10YT=RR were unchanged, yielding 1.94 percent.
Should the Fed's announcement be less aggressive than the
market anticipates, some selling could ensue, traders said.
The Fed could gradually weight its portfolio toward
longer-dated securities in two ways: by buying longer-dated
bonds with proceeds from maturing securities or by more
actively selling short-dated notes to buy longer-dated bonds.
The Fed could also offer more policy guidance on the fed
funds rate or the size of Fed's balance sheet, said Joseph
LaVorgna, chief U.S. economist at Deutsche Bank Securities.
While the current guidance explicitly applies to the level
of the fed funds rate, the Fed could enhance that guidance by
linking the funds rate to various thresholds of unemployment
and inflation; or they could also apply some version of the
"extended period" language to the size of the Fed's balance
sheet, LaVorgna said.
Markets do not expect the Fed to expand its balance sheet
through additional quantitative easing at this time.
(Editing by Theodore d'Afflisio)