The first and fastest move was from July 2007 through September 2007, when dealers added $98.8 billion as two hedge funds run by Bear Stearns Cos. began to collapse and Paris-based BNP Paribas SA halted withdrawals from three of its funds because the bank couldn't "fairly" value their holdings.
The Fed addressed that crisis by cutting the discount rate it charges banks for short-term funds by 50 basis points to 5.75 percent in August 2007, followed the next month by reducing the federal funds rate by the same amount to 4.75 percent.
Third Time
Dealers added $103.8 billion from November 2008 to April 2009, as the Fed began to buy $600 billion of mortgage and related debt. That program was expanded in March 2009 to total $1.25 trillion of mortgages, $300 billion of Treasuries and $200 billion of agency debentures.
The third time came when they increased holdings of U.S. government notes and bonds by $47.5 billion from September 2010 through November 2010, amid rising speculation that the Fed would resume buying Treasuries as growth slowed.
"Certainly, something's coming from the Fed," Suvrat Prakash, an interest-rate strategist in New York at BNP, another primary dealer, said in a Sept. 12 telephone interview.
Primary Dealer Year-End Yield Forecasts and Operation Twist
Firm 10-Year 30-Year Twist?
Bank of America 2.3 3.7 Yes
Barclays 2.25 3.55 Yes
BNP Paribas 2.5 3.55 Yes
Cantor Fitzgerald 2.375 3.75 No
Citigroup 2.35 3.65 In November
Credit Suisse 1.75 3.35 Yes
Daiwa 2.25 3.75 In December
Deutsche Bank 2.25 3.5 Yes
Goldman Sachs 2.75 3.75 Yes
HSBC 2.4 3.6 NA
Jefferies 2 3.25 Yes
JPMorgan Chase 2.6 3.9 Yes
MF Global 2.8 4 Yes
Mizuho 1.5 NA In November
Morgan Stanley 2.1 3.5 Yes
Nomura 2.3 3.6 Yes
RBC 2.1 3.5 Yes
RBS 1.75 2.85 Yes
Societe Generale 2 NA Yes
UBS 2.5 NA Yes
Mean 2.24 3.57