The Fed chases the curve

ConclusionThe historical decisions of the Federal Reserve with respect to interest rates, at least during the Greenspan period, consistently point to very significant inertia in the policy making process. To the extent that this translates to the exit strategy and the non-interest rate tools used by the Fed during the current crisis, our results suggest that the policy reversal is likely to be gradual, in the absence of additional significant economic shocks.VoxEU Research Paper

The research looked at the stable period of the curve, prior to the crash. Th Fed is allocated a specific part of the curve, it has a share of bandwidth. Literally, there is a production system of traders that adjust the curve to maximize shared apce and minimize overlap. Here is my model under maximum entropy. During the period of study, the Fed has enough room to sample at the 3 month term and effect the 6 month term, that was the amount of channel space it got.