Operation Twist drives low long-term interest rates even lower

The Federal Reserve is taking cues from Chubby Checker with its new Operation Twist initiative. The plan is to try to drive down long-term interest rates by selling short-term bonds and buying up long-term ones, which the Fed hopes will stimulate the economy, according to Forbes. Many oppose this move because interest rates are already at historic lows.

“Frankly, I don’t see it having any meaningful impact on the economy,” Bernard Baumohl, chief global economist at the Economic Outlook Group, told the news source. “What the Fed did today was a distraction.”

However, Operation Twist managed to drive the already-low yield on ten-year Treasury notes down from 1.93 percent to 1.86 percent when the plan was announced. This is the lowest that long-term yield ratios have been since 1962, Forbes reports. It also means that now is an ideal time for people who are seeking mortgages and car loans.

If the Fed continues on this path, rates will remain low. This means that drivers with low credit scores can apply for a bad credit car loan, which will likely have a higher interest rate. After making timely payments, which will improve their credit scores, drivers can refinance their loans to get better rates in the future.