Given the weakness of the incoming economic data, the Fed is now almost certain to do something at next week's FOMC meeting, but exactly what is still not entirely clear. The proposal to lengthen the average duration of the Fed's asset holdings appears to be the front runner. The aim of what has been dubbed Operation Twist would be to flatten (twist) the yield curve by buying longer term Treasury bonds and selling an offsetting amount of the Fed's current holdings of shorter term bonds.
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