QE3: The long and the short of it

Long term rates and short-term rates are linked through arbitrage so a credible commitment to keep short-term rates low for an extended period of time can also generate a movement in long-term rates, as Justin Wolfers points out. According to Macroeconomic Advisors the effect can be quite large:

In principle, FOMC communications can be very powerful. If the FOMC could encourage the market to shift out its expectation of the time of the first rate hike by six months, the impact on the ten-year Treasury yield would be comparable to that of $760 billion of QE! Our analysis suggests that a six-month shift in the expected time of the first rate hike would have a significant impact on the yield curve.