Goldman sees Fed buying $300 billion to $400 billion in Operation Twist

With the FOMC announcement just one day away, the market consensus is that we’re getting Operation Twist. The key question remaining is the size and composition of the twist. Economists at Goldman Sachs said in a note late Monday that they expect the Fed, in increasing the average maturity of its bond holdings to stimulate the economy, to purchase a net $300-$400 billion in 10-year equivalent debt — i.e., taking on the same amount of duration risk as $300-$400 billion of the current 10-year Treasury note.

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