What is an 'Operation Twist'
An operation twist is the name given to a Federal Reserve monetary policy operation that involves the purchase and sale of bonds. "Operation Twist" describes a monetary process where the Fed buys and sells shortterm and longterm bonds depending on their objective. For example, in September 2011, the Fed performed Operation Twist in an attempt to lower longterm interest rates. In this operation, the Fed sold shortterm Treasury bonds and bought longterm Treasury bonds, which pressured the longterm bond yields downward.
BREAKING DOWN 'Operation Twist'
The name "Operation Twist" was given by the mainstream media due to the visual effect the monetary policy action was expected to have on the shape of the yield curve. If you visualize a linear upward sloping yield curve, this monetary action effectively "twists" the ends of the yield curve, hence the name Operation Twist.

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