Fed paper loss on bond holdings narrows to $844 billion in 2025

The Federal Reserve’s paper loss on its bond holdings narrowed sharply in 2025, but the figure still underscored how violently higher interest rates have reshaped the central bank’s balance sheet. The unrealized loss on the Fed’s securities portfolio fell to $844.2 billion, down from $1.06 trillion in 2024, a decline that reflects market valuation changes rather than cash losses or a forced sale.

The New York Fed disclosed the number in its annual report, Open Market Operations During 2025, published April 13, 2026 and prepared for the Federal Open Market Committee. The report describes the System Open Market Account, or SOMA, the Fed’s massive portfolio of Treasury securities, agency mortgage-backed securities and other assets accumulated through years of crisis-era bond buying and market support. SOMA held about $6.3 trillion in assets, within a broader Fed balance sheet of roughly $6.6 trillion, including about $4.4 trillion in Treasuries and $2 trillion in agency mortgage-backed securities.

The accounting loss matters because it can sound more alarming than it is. The New York Fed said unrealized gains and losses do not affect monetary policy, net income or Treasury remittances if the bonds are held to maturity. In practical terms, the market value of the portfolio moves with interest rates, but the Fed is not marking those securities to market in a way that creates an immediate cash crisis. The balance-sheet damage is real in an accounting sense; it is not the same as a liquidity emergency.

Even so, the scale of the loss remains a reminder of the legacy of ultra-low rates and aggressive asset purchases, and of the pressure that can build when policy tightens. The Fed reported operating losses of $19.6 billion in 2025, down from $77.5 billion in 2024, another sign that the financial picture has improved even if it remains unusual by historical standards. Prior reporting showed the 2024 unrealized loss was modestly higher than the $948.4 billion paper loss recorded in 2023, when higher market interest rates across the yield curve pushed valuations down.

The New York Fed said its staff projects the central bank will stay profitable in coming years and that the cumulative accounting loss will be worked off over time, with excess profit expected to return to the Treasury again by early 2030. The Fed last recorded a profit in 2022, when it transferred $76 billion to the Treasury, after remitting $109 billion in 2021. For households, the numbers matter because they show how rate moves ripple far beyond mortgages and savings accounts, reaching into the Fed’s own portfolio and the flow of money back to the government.