Headline: Market expects Operation Twist in September
(Reuters) - Bond investors see Federal Reserve action to boost the flagging U.S. economy as practically a done deal after Friday's dismal jobs report.
Government data showing the economy failed to create new jobs last month heightened speculation the Fed will launch a program this month to pump money into the economy by pushing down long-term borrowing rates.
The move, known to some in financial markets as Operation Twist, would probably involve the Fed selling shorter-dated Treasuries it holds its balance sheet and buying longer-dated bonds.
The Treasury market appeared to price in greater chances of this after the jobs report, with 30-year long bonds surging 3 points in price.
"Following today's worse-than-expected jobs report, we now look for the Federal Open Market Committee to announce a lengthening of the average maturity of the Fed's balance sheet at the September 20-21 meeting," Jan Hatzius, chief U.S. economist at Goldman Sachs in New York, wrote in a note to clients.