While Fed staff called it Operation Nudge, it became known as Operation Twist, after Chubby Checker's hit, The Twist, according to a report published March 14 by Eric Swanson, an economist at the Federal Reserve Bank of San Francisco. The move lowered long-term Treasury yields by about 15 basis points, or 0.15 percentage point, according to Swanson.

Policy makers meet the next two days, after Bernanke said in an address at the Kansas City Fed's annual monetary policy conference Aug. 26 that the Fed still had "a range of tools that could be used to provide additional monetary stimulus."

Fed Minutes

Minutes of the Fed's Aug. 9 meeting released Aug. 30 showed that some central bankers said selling debt with shorter maturities and purchasing longer-term securities had the potential to push borrowing costs lower.

The Fed holds $1.66 trillion of Treasuries, including $520 billion of debt due in 2014 and sooner that could be sold and reinvested in securities maturing from 2018 to 2039, according to CRT Capital Group LLC strategists David Ader and Ian Lyngen. That may pull 10-year yields down to 1.6 percent, they said.

Economists and strategists at Credit Suisse Group AG, another primary dealer, said in a Sept. 16 report that the Fed will likely announce that it's buying $400 billion of Treasuries with maturities of seven to 10 years over the next six months.

Any signs that Europe is moving closer to resolving its debt crisis may keep bonds from rallying. Yields may rise to 2.5 percent for 10-year notes and to 3.75 for 30-year bonds by year- end if officials from the 17 nations that share the euro are able to insulate the region's banks from Greece, Ireland and Portugal, said Amitabh Arora, an interest-rate strategist in New York at Citigroup Global Markets, another primary dealer.

German 10-year bunds yielded 1.79 percent, compared with 22.56 percent for similar-maturity Greek securities.

'Priced In'

The effect of an Operation Twist is "pretty much priced in," Arora said in a Sept. 13 telephone interview. "What's not priced in is a change in outlook for growth. As long as the European crisis does not end up a core banking crisis, we're going to end up higher with yields by the end of the year."

Cantor Fitzgerald LP is the only dealer surveyed by Bloomberg News to say it doesn't expect the Fed to announce an Operation Twist-like policy.