Oct 14 (Reuters) - The U.S. Treasury Department is asking primary dealers of U.S. Treasuries whether the government should buy back some of its bonds to improve liquidity in the $24 trillion market. The Treasury is also querying whether reduced volatility in the issuance of Treasury bills as a result of buybacks made for cash and maturity management purposes could be a "meaningful benefit for Treasury or investors." But it let that exclusion expire and big banks had to resume holding an extra layer of loss-absorbing capital against Treasuries and central bank deposits. The Treasury Borrowing Advisory Committee, a group of banks and investors that advise the government on its funding, has said that Treasury buybacks could enhance market liquidity and dampen swings in Treasury bill issuance and cash balances. The Treasury is posing the questions as part of its regular survey of dealers before each of its quarterly refunding announcements.

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