Saturday, February 25, 2012

Is the Fed informally targeting mortgage rates?

Guest post by TheDealer

There is no direct evidence for this, but folks on trading floors are saying the Fed may be trying to smack down 30-year fixed mortgage rate. The average rate is still near historical lows.

30 year fixed mortgage rate (source:

But it seems every time the rate pops up from the lows, a series of Operation Twist trades takes place.  Here is what happened to the treasury curve Friday - some visible flattening action.

Friday's change in treasury yields by maturity

Call me crazy but I don't think this is a coincidence.
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