How do you stimulate the economy without spending any money? You do the twist and shuffle. The Federal Reserve announced Wednesday that it would engage in a new policy known as “Operation Twist,” consisting of selling shorter-term Treasuries and using the proceeds to buy longer-term government bonds. The Mortgage Bond markets soared today after the surprise announcement from the Fed saying that it will be purchasing agency Mortgage Backed Securities from the principal payments from its holdings of agency debt and agency Mortgage Backed Securities in agency Mortgage Backed Securities. The move took players by surprise in a big way. The 3.5% coupon jumped 134bp to end at an all-time high of 103.00 The next few trading days will determine if we switch over to the 3% coupon, which finished at 99.81 up 134bp today.Stocks plunged after the Fed statement read that there are significant downside risks to the economy. The Dow lost 283.82, the Nasdaq fell 52.05 to 2,538.19 while the S&P 500 Index dropped 35.33. Oil in after hours trading was last seen at $84.83/barrel down $2.09. Weekly claims will be released tomorrow.