NY Fed flags $1.06 trillion unrealized loss on bond holdings in 2024
The bank said in its annual report, opens new tab for the System Open Market Account, the Fed's massive holdings of cash and securities, that the $1.06 trillion unrealized loss in 2024 was 'modestly higher' than the $948.4 billion paper loss seen in 2023. The state of unrealized losses last year was due to 'higher market interest rates across the yield curve' while partially offset by reduced Fed holdings of bonds.
The Fed noted unrealized losses capture the difference between the book value of securities it owns versus the current market price. These paper losses do not affect monetary policy operations and are not an issue of note given that the Fed holds its bonds to maturity. The report added the unrealized loss on Fed holdings will likely prevail for years to come.
The Fed's balance sheet in recent years has undergone massive expansion, more than doubling to a peak of $9 trillion by 2022 as the Fed bought Treasury and mortgage bonds to stabilize markets and add stimulus during the pandemic. It has been shrinking its holdings for some time, with the overall size of its balance sheet now at $6.7 trillion.
The Fed's large holdings are expected to stabilize in January 2026 at $6.2 trillion, the Fed report noted, based on the current view of market participants.
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