Essentially it's one of the Fed's 'tools' that it use to try and stimulate the economy by making a concerted attempt to lower medium/long term interest rates and stimulate housing and business borrowing.
The 'Operation Twist' idea originates back to the Kennedy Administration and its desire to get interest rates lower in order to lower the balance of payments deficit at that time.
Observers expect that the Federal Reserve will be announcing this later this month.
In a 'twist' on the methodology used by the earlier Fed, which sold short term Treasuries and bought long term Treasuries, many believe that the Fed this time around will try to pull down interest rates and flatten the curve solely by buying the longer paper.
So "Operation twist" will be an attempt by the Fed to lower medium/long term interest rates by pegging the short term rate to zero and then going out and buying longer-date Treasuries.
Look for the Federal Reserve to do more than this too. At its next meeting Sept 21-22 many speculate that they will also announce some sort of new QE.
With all that has been going on with the European banks, they are almost sure to inject massive liquidity into the collapsing banking system. Look for the Fed to buy more crap assets from banks. The Fed will also need to expand its balance sheet to pay for Obama's new spending program he is sure to announce tonight.
With the return of the Kennedy era 'Twist' operation, it's time to mimic Chubby Checker and Twist Again!
Gold and mining stocks are going to be volatile BUT they are going to go a lot higher within the next month or two.
You can count on it.
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