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Potential Federal Reserve Twist

mvbosch
mvbosch   |     |   8 posts since 2011

Please comment on this train of thought:  Under the Twist program being considered, the Federal Reserve would sell some of its inventory of short term (0-5 years) treasury bonds and use the proceeds to buy longer term treasury bonds like 30 year ones.  The sale of short term bonds would reduce the price of the bonds and raise their yields.  Would this raising of the short term treasury bonds yields have any impact on the interest rates offered by banks on their 0-5 year CD's? 



Answers
Ken Tumin
Ken Tumin   |     |   5,693 posts since 2009
I don't want to sound pessimistic, but I doubt it would have much effect on short-term deposit account yields. Short-term Treasury yields are so low now (see yields) , that a small rise in these yields probably won't have much impact on deposit account yields.
Ken Tumin
Ken Tumin   |     |   5,693 posts since 2009
 

I just published my blog post on today's FOMC meeting.