The 1940s original YCC: thread
The initial proposal to peg the US Treasury yield curve was first presented at the June 1941 FOMC meeting by Emanuel Goldenweiser, director of the Division of Research and Studies. https://www.federalreserve.gov/monetarypolicy/files/FOMChistmin19410610.pdf

The context for the YCC was very clearly to help with government war finances. First, the ally Britain. In a speech on October 30,1940, http://www.fdrlibrary.marist.edu/_resources/images/msf/msf01378
President Roosevelt promised every possible assistance even though Britain lacked the financial resources to pay.

The Lend-Lease Act, https://history.house.gov/Historical-Highlights/1901-1950/The-Lend-Lease-Act-of-1941/
passed by Congress in March 1941,eventually signaled that US would finance whatever Britain required.
US direct involvement in WW2 after the bombing of Pearl Harbour ensured the US itself would have to spend heavily on the war effort.

In addition,US economic circumstances leading to the decision to peg the UST curve were not that different to today. The banking system was flush with liquidity on the back of large gold inflows, inflation was around 2% and the shape of the yield curve (front end) was similar.

3m TBill was around 0%,the 5yr around 65bp but the long bond was at 2.5%.With the start of the war,inflation picked up but there were price controls put in place which limited its rise. Gov debt/GDP,however,was much lower than today and it got to present levels only by end of WW2

By the time the actual peg went in place, the curve had steepened, especially the 10yr had gone to 2%, as inflation really accelerated. Inflation eventually reached a staggering 12.5% in 1942 at which point even more price controls were imposed.

The decision to peg interest rates was never officially announced. In fact, US Treasury Secretary, Henry Morgenthau’s preference was for a continuation of what today we regard as quantitative easing (QE), i.e. Fed using a quantity rather than rates target.

Under the peg,the Fed,instead,had to buy whatever the private sector sells as long as yields were above the stipulated levels.Naturally,investors were riding the positively sloped yield curve. The Fed was forced to accumulate a lot of T-Bills as a result.

However, Fed's holdings of coupons was never that large. With the end of the war, inflation started picking up again and the Fed eventually took off the yield peg in the front end in July 1947. The peg in the long end stayed until the March 1951 US Treasury Accord.