Fed extends Operation Twist until the end of the year with swap potential of $267 billion to buy 6-30 year bonds in exchange for 3-years and under maturities. The Fed wants to continue to flatten the curve in a low growth economy.The Fed also said that it would be will to take more action as appropriate.
The first Operation Twists began last September 21 and totaled just under $400 billion. It was supposed to end this month. It was able to lower 10-year yields about 25 bps. The stock market gained about 18% since the program began but growth has stalled to a rate below 2%. The flattening of the yield curve will provide added value to banks and long-term borrowers including home-owners. However, the economy seems to be more effected by cash flow expectations than the discount rate.
The was a simple policy adjustment that moves closer to more QE without announcing another QE program.
The first Operation Twists began last September 21 and totaled just under $400 billion. It was supposed to end this month. It was able to lower 10-year yields about 25 bps. The stock market gained about 18% since the program began but growth has stalled to a rate below 2%. The flattening of the yield curve will provide added value to banks and long-term borrowers including home-owners. However, the economy seems to be more effected by cash flow expectations than the discount rate.
The was a simple policy adjustment that moves closer to more QE without announcing another QE program.
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