Strategies: Federal Reserve Considers a Revival of ‘Operation Twist’

By Cullen Roche: The Operation Twist rumors are picking up momentum. In several interviews Friday morning on Bloomberg both Jan Hatzius of Goldman Sachs and David Rosenberg of Gluskin Sheff mentioned the likelihood of an Operation Twist type QE3 coming perhaps as early as September (thanks to Ed Harrison at CW).

In the search for potential policy tools that the Fed might employ under current distressed conditions, some analysts have floated the idea that the Fed could implement something dubbed as “Operation Twist.” This policy would consist of implementing measures to increase interest rates at the short end of the curve (including sale of short-term Treasury securities) and purchasing Treasuries at the long end in order to lower long-term interest rates. In this article I want to briefly explain why I believe that an “Operation Twist”

By Market Blog: By David Berman If the Federal Reserve’s decision to shift its holdings from short-term bonds to longer-term bonds – a move dubbed Operation Twist – has left you feeling unstimulated and unlikely to go out and buy something to help revive the economy, you’re not alone. While the Fed’s latest monetary policy was largely anticipated by market watchers, the early reactions from economists is decidedly lukewarm.

The Federal Reserve will purchase US$44-billion of longer-maturity Treasuries and sell the same amount of shorter-term debt in October under its monetary stimulus plan that’s become known as Operation Twist

By Russ Koesterich: On Wednesday, the Federal Reserve outlined its new “Operation Twist” program. The central bank will buy $400 billion of long-term Treasuries in an effort to lower long-term interest rates and spur lending and economic growth.

By Market Blog: By David Berman Wondering why the stock market’s reaction to the Federal Reserve’s Operation Twist – buying longer-term bonds and selling short-term bonds – has been so negative? Let’s call it economic capitulation: The point at which the last optimistic impulse over the European debt crisis, U.S. economic growth and the ability of central banks to do much of anything gives way to hopelessness.

The Fed will respond to Friday’s brutal jobs report by announcing an Operation Twist—the purchase of longer-dated Treasurys and sale of short-dated Treasurys—at its next meeting, economists said.

PIMCO founder and co-CIO Bill Gross spoke with Bloomberg Television's Margaret Brennan today, telling Bloomberg TV that the Fed will likely shift focus to mortgage securities to keep borrowing rates low when Operation Twist ends in June.