Fed sitting on $3.6 bln QE2 loss so far-Reuters Insider

NEW YORK, Dec 16 (BestGrowthStock) – The Federal Reserve is
currently sitting on paper losses of about $3.6 billion on the
purchases of U.S. Treasuries it has made since November 12,
according to an analysis by Reuters Insider.

According to calculations by Reuters Insider credit analyst
Ed Rombach, the average duration of the Fed’s new portfolio of
bonds is just under 5 years, and every 1-basis-point rise in
5-6-year Treasury yields results in a loss of about $65
million.

The mark-to-market calculations do not include Thursday’s
$6.78 billion worth of purchases by the Fed. The current market
value of the portfolio is $119.5 billion, versus its notional
value of about $127.6 billion, according to the calculations.

The Fed announced its new program of government securities
purchases, or quantitative easing, last month in an attempt to
keep market interest rates low and bolster the economy.

Markets have dubbed the program QE2 since it’s the Fed’s
second go at massive asset purchases.

Since the announcement, however, the U.S. government bond
market has sold off sharply, pushing interest rates higher and
taking a huge toll on the market value of the bonds the Fed has
bought.

Fed sitting on $3.6 bln QE2 loss so far-Reuters Insider