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The Fed's annual profit surges to $81.7 billion
- Thread starter atticus
- Start date
I would disagree... I think by the time they start thinking about QE unwind, there won't be much MBS left on their balance sheet.Quote from Daal:
I dont believe the Fed is holding the MBS to maturity, Bernanke said under oath is his intention to sell the assets from the QEs. Therefore MTM might make sense due the interest rate risk
Quote from Martinghoul:
I would disagree... I think by the time they start thinking about QE unwind, there won't be much MBS left on their balance sheet.
ok but think about the implications of saying the assets are there temporarily and yet not marking them to market. Its inconsistent and reeks as an accounting trick used to now show losses/volatility
Yes, of course all the assets are on the Fed balance sheet temporarily, but that's because the portfolio is self-amortizing, especially the MBS portion of it. They're redeeming at par at a rate of smth like $30bn/month (that's last I heard), so why should they be marked-to-mkt at anything else? Moreover, apart from sle's excellent point, why should volatility/liquidity matter for an accrual account that by definition knows no concept of "funding/opportunity cost"?Quote from Daal:
ok but think about the implications of saying the assets are there temporarily and yet not marking them to market. Its inconsistent and reeks as an accounting trick used to now show losses/volatility
Quote from Martinghoul:
Yes, of course all the assets are on the Fed balance sheet temporarily, but that's because the portfolio is self-amortizing, especially the MBS portion of it. They're redeeming at par at a rate of smth like $30bn/month (that's last I heard), so why should they be marked-to-mkt at anything else? Moreover, apart from sle's excellent point, why should volatility/liquidity matter for an accrual account that by definition knows no concept of "funding/opportunity cost"?
There is a difference between being on the balance sheet temporarily because they will mature one day and being temporarily because the owner expects to sell it, what you believe will happen could be true but its not what the Fed STATES will happen(They say they will sell)
They said they will sell "QE assets"... Why are you interpreting this to mean MBS? Moreover, if they sell 0.01% of their UST portfolio and sit on the rest of their assets to maturity that would technically qualify as "selling of QE assets", wouldn't it?Quote from Daal:
There is a difference between being on the balance sheet temporarily because they will mature one day and being temporarily because the owner expects to sell it, what you believe will happen could be true but its not what the Fed STATES will happen(They say they will sell)
Quote from Martinghoul:
They said they will sell "QE assets"... Why are you interpreting this to mean MBS? Moreover, if they sell 0.01% of their UST portfolio and sit on the rest of their assets to maturity that would technically qualify as "selling of QE assets", wouldn't it?
1st - Because they are part of QE1
2nd - Yes. But the fed can't have the free lunch of saying 'its not monetization because we will sell the QE purchases' and at the same time have the accounting treatment as if they were not going to sell it. I'm asking for consistency here. They are supposed to lead by example
And even if they dont sell the MBS, still, the USTs from the QEs should be MTM given they already said they already said its a trade not a HTM type of investment. They probably didn't want to lose reputation when they start to report losses as IR rise hence they are treating as if no selling is going to happen