Tsy Quarles: Appetite For US Assets Still `Very High' -U.S. Treasury Undersecretary for Domestic Finance Randal Quarles said Tuesday he sees little threat to a continuation of foreign buying of U.S. dollar denominated securities. "The appetite for dollar-denominated securities...will always remain very strong" and foreign interest in such investments currently "remains very high," Quarles said. His comments came in response to audience and media questions after a speech in which he downplayed the threat of a drop in foreign demand to yield levels in the Treasury market. Quarles made his comments Tuesday evening in New York. In his post-speech remarks, Quarles declined to comment on recent declines of the dollar, and he also said he would not "front run" a report from the Treasury due Wednesday afternoon about the foreign exchange market. Opinions are divided over whether the report will call China a currency market manipulator. Quarles also declined to comment on the recent G7 policy statement which called for an appreciation in Asian currencies, saying the "statement speaks for itself." In his remarks, Quarles also said reigning in the U.S. current account deficit, which currently stands at record levels and is widely viewed as unsustainable, is a "shared responsibility." He explained the remedy requires reduced U.S. government budget deficits, greater overseas growth, and "increased currency flexibility" by Asian nations. The Treasury official downplayed the negative economic impact of rising long term bond yields. Overall, bond market rates are "still moderate" and even with recent gains "we do not expect that to have an adverse effect on the economy." Quarles also downplayed the size of the U.S. debt and said that it needs to be judged in relative terms. "What's really important is the perception of the evolution of our debt to GDP ratio," which remains tame by historical standards. Moreover, he noted the government's debt service burden remains "remarkably low." Quarles also said that the Administration was making strides at shrinking deficits, saying "we are calling the shots and we are making the shots," and that that was showing the government's continued credibility in managing its fiscal house. The Treasury official was also asked about reform legislation in Congress aimed at the government sponsored entities that help finance mortgage lending. "A positive legislative outcome is certainly achievable" and "we are urging" legislators "to act on the Shelby bill."