SOMA's Unrealized Loss : What Does it Mean?

In May 2018, the Federal Reserve published its Federal Reserve Banks Combined Quarterly Financial Report for the first quarter of 2018. For the first time since 2013, the report showed the System Open Market Account (SOMA) portfolio having an unrealized loss position. In particular, SOMA displayed an unrealized loss position of $462 million. What does it mean for the Fed to have an unrealized loss position on its securities holdings? This Note discusses the various valuation measures of the Fed's securities holdings, what these values mean, and the expected evolution of the value of the SOMA portfolio. Importantly, as discussed below, the SOMA portfolio's unrealized position has no effect on the ability of the Federal Reserve, as a central bank, to meet its financial obligations and pursue its statutory goals of price stability and maximum employment; in addition, it has no implications for the evolution of the Federal Reserve's earnings remittances to the U.S. Treasury or, ultimately, for U.S. taxpayers when, as expected, securities are held to maturity