Federal Reserve Could Lose on Bonds

The Federal Reserve could be setting itself up for a very profitable year, with very little extra income to dish out to the U.S. Treasury for several years, according to a recent article in the Wall Street Journal. The resulting dynamics could force the Federal Reserve to sell bonds at a loss in the future and incur higher expenses on the interest it pays, if the economy improves.

With the central bank adding some $85 billion per month to its $3 trillion portfolio, the concern has grown enough to warrant discussion during upcoming meetings. The Federal Reserve earned an estimated $91 billion last year and sent nearly $89 billion of it to the Treasury - a record amount that could again take a turn for the worst.