Operation Twist: 3 Standard Deviations

Wednesday's FOMC meeting outcome was a throwback to FED action not seen since 1961. The result was "operation twist": a plan to sell $400 billion of short term securities and to purchase an equivalent amount of bonds from 6 years to 30 years in maturity. Bernanke's hopes are that this action will keep long term rates low, thus improving the environment for those depending on the long end of the US yield curve for financing.

The effect, so far, of this action has been a 3-standard deviation move in the US 30 year bond, which immediately rocketed in price and has not looked back since. As of Tuesday 9/20, a one standard deviation move in the front 30-Year US bond future was 1.08%. By the close of business on Wednesday 9/22, the bond had moved 3.06%: a very large move indeed.

Here are the current 1-standard deviation values for all CME US Bond Futures as of the close on 9/20, prior to the FOMC meeting.

The results above were calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.