"There's a concern about the marginal impact of operations like this," Brian Edmonds, the head of interest rates at Cantor in New York, said in a Sept. 16 telephone interview. "We have a low-rate environment. Will another 20 basis points in 10-year notes make a big difference? It might seem like not a great time for the Fed to try something where there might not marginally be a big difference in what they do."

'Reserve Creation'

At least one dealer said there's a chance that the Fed may go beyond Operation Twist and print more cash to buy $600 billion to $1 trillion of Treasuries if policy makers determine the economy may be heading toward another recession.

"To beat around the bush at this point doesn't make any sense," George Goncalves, the head of interest-rate strategy in New York at Nomura Holdings Inc., said in a Sept. 14 telephone interview. "If things are that bad and require easing, I think it's more effective to go to reserve creation instead of trying to change the composition of the portfolio, which might not necessarily work."

By focusing on lowering long-term bond yields, policy makers are trying to support demand for homes and cars, as well as for corporate debt, as lawmakers reign in expenditures.

The extra yield investors demand to own U.S. high-grade bonds rather than government debt has widened 12 basis points to 233 basis points this month through Sept. 15, compared with an expansion of 31 basis points to 290 for debentures in Europe, Bank of America Merrill Lynch index data show.

The debt limit extension signed by President Barack Obama on Aug. 2 requires $2.4 trillion in spending cuts over the next 10 years. The economy didn't add any jobs in August, and the unemployment rate held at 9.1 percent, the Labor Department said Sept. 2.

'Played Out'

The ability of monetary policy to boost the economy "is largely played out at this stage," Michael Cloherty, head of U.S. interest rate strategy at New York RBC Capital Markets, said in a telephone interview Sept. 13. RBC is a primary dealer.

Since the signs of stress in the financial system first began in June 2007, there have been four instances where bond dealers increased holdings of Treasury notes and bonds.