How Central Banks Use Operation Twist to Shape the Yield Curve

Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates · Jun 5, 2026 · 8m · transcript

In this episode of Monetary Policy Explained with Fexingo, Lucas and Luna dive into Operation Twist, a lesser-known but powerful tool central banks use to flatten the yield curve without changing the policy rate. They walk through the 2011-2012 US example where the Federal Reserve sold short-term Treasuries and bought long-term bonds to lower long-term borrowing costs. Along the way, they discuss how Operation Twist differs from quantitative easing, why it fell out of favor, and whether it could make a comeback in a world where central banks are wary of bloated balance sheets. Perfect for…