The Federal Reserves’ new program Operation Twist, is designed to lower long-term interest rates. The Federal Reserve expects to keep long-term rates low by shift their asset profile from short-term assets to long-term assets. This program will positively impact mortgage rates, especially long-term rates such as 30 and 15 year mortgages. The move had an immediate effect on the 10 year note. The 10 year note dropped below a yield of 1.8% in trading this morning For more about Operation Twist can be seen in the link to Bloomberg News below.
There seems to be mixed market feelings over this program. Most agree that it will bring and hold interest rates down, but many do not think it will have a big effect on the economy. However, if it stimulates an appreciation in housing prices that may help the economy in the long run.
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