Operation Twist

The Fed’s latest strategy “Operation Twist” involves buying up long-dated treasuries, but is/will have unintended consequences: 1) it will reduce the earning power of banks by flattening the yield curve (banks make an interest spread by borrowing short and lending long): and 2) Insurance companies and Pensions will have a more difficult time matching their liabilities.  This is not good news for three entities that are already struggling in this economic environment.


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