* Fed buying leaves just $170 bln in Treasuries to market
* Estimated $340 bln will be available in July, Aug, Sept
* General collateral rates kept low by 'dry' market
By Emily Flitter
NEW YORK, May 11 (Reuters) - Conditions in the repurchase market may remain rough until the Federal Reserve ends its Treasury purchasing program at the end of June, analysts said on Wednesday.
The rates on general collateral in the repo market have been stunningly low since April 1, when a change in insurance assessment methods for commercial banks forced a flood of cash into the short-term financing markets, sucking up the collateral that comprises the other side of a repurchase agreement.
Rates on the securities repo that traders use as general collateral fell to single basis-point ranges and even turned negative in cases where a particular type of security came into greater demand.
And Treasury purchases by the Fed may be adding to the problem.
Ward McCarthy, chief financial economist at Jefferies & Co. in New York, said the Fed's Treasury purchases from the beginning of its easing program in November until the end in June will leave just $170 billion in floating Treasury coupons available in the market.
Even though the Fed lends out some of the securities it purchases so they can still be used as repo collateral, its ownership of such a large portion of securities issued adds to the pressure on repo collateral rates.
"The issue is what's part of the floating supply in the market," McCarthy said. "The Fed lending can help ease squeeze types of situations but that's an augment to a market that's just dry."
General collateral rates remained low on Wednesday, with rates on two-year Treasury notes in negative territory, according to Roseanne Briggen, analyst at IFR, a unit of Thomson Reuters.
"Short-term, safe, liquid assets are still seeing demand, even as real money has been finding alternative slightly higher yielding investments," Briggen wrote in a note to clients on Wednesday.
The environment could get friendlier starting in July. McCarthy notes the Treasury will issue a total of $536 billion in Treasury coupons in July, August and September. With the Fed no longer buying, that will mean $340 billion in Treasuries will be available to market participants, once maturing securities are taken out.
"The floating supply of treasuries will double," McCarthy said. (Editing by Leslie Adler)