The US Federal Reserve yesterday damped expectations that it was preparing to prop up the market for distressed bubble-era securities backed by mortgages.

Hopes that the Fed would in the coming months start providing financing to investors seeking to buy residential mortgagebacked securities – many of which have lost their triple A credit ratings – have pushed prices on these assets higher in recent months.

William Dudley, president of the Federal Reserve Bank of New York, said yesterday that a decision had not been made. 'We have not made a final decision on whether it is do-able and, if it is do-able, whether it is worth the cost,' he said.

Financial Times