Treasury Curve Dysfunction Ignites Talk of Federal Reserve Twist

Turmoil in Treasuries that has sent longer-dated yields soaring is stoking talk that the Federal Reserve might look to revive Operation Twist in order to reassert stronger control over interest rates at both ends of the yield curve.

Rising expectations about inflation and an unraveling of market positions helped send bond yields surging last week, with the benchmark 10-year rate spiking above 1.6% for the first time in around 12 months. The surgehas brought with it sloppy auctions, worsening liquidity and a wider difference between bid and offer prices. At the same time, there is also concern about rates ...