The right answer is 3 and 4 only Key Points Under Operation Twist Simultaneous buying of long term bonds and selling of short term bonds is done. Hence statement 3 and 4 are correct When purchasing longer-term bonds, it drives the bond prices up and yields down because prices and yields move in opposite directions. At the same time, when selling shorter-term bonds, it causes their yields to go up as prices would fall. In combination, these two actions twist the shape of the yield curve. Federal Reserves in USA first used it in 1961 Additional Information Rationale There is an outflow of gold and domestic currency from India to other attractive global markets. That is due to high yields in long term assets and low yield in short term assets. A proposed solution to check the outflow of Indian currency is to try to increase the short-term yields, while lowering the longer-term interest rates. Therefore, if longer-term interest rates could be lowered without affecting short-term yields, the declining economy can be stimulated without worsening the outflow of gold and domestic currency. RBI’s ‘Operation Twist’ mechanism to push up shorter-term interest rates, while pushing down long-term rates, is believed to solve this problem.