quote:No. The Fed has nearly zero short-term securities left in its portfolio which it can sell to offset the long-term security purchases. So it can't continue to do what it's been doing in Operation Twist.
With the FOMC meeting coming up and the ending of Operation Twist, do you see Bernanke announcing an extension of it?
quote:Op Twist will expire. I expect the FMOC to announce it will continue to buy mortgage-backed securities of approx. $40 billion a month, which it has already said it would do. Those purchases will be almost offset by maturing securities and interest payments received so the monetary base will be relatively steady.
Will it be changed at all?
quote:Not soon....maybe by the end of 2013. With the Fed continuing to buy the LT mortgage-backed securities each month, I anticipate LT rates will remain artificially low for a while longer.
In other words do you expect the yield curve to "un-flatten"?