The U.S. Federal Reserve's program to keep mortgage rates low by buying securities and Treasury bonds so far has been costly and seems to be having a fleeting impact.

An analysis of the timing of the Fed's purchases of mortgage-backed securities by J.P. Morgan Chase & Co. shows the Fed is 'under water' on its portfolio by about 1%, and it would have to take about $5bn in losses if it were to mark its portfolio to the market.

Since last autumn, the Fed has purchased more than $480bn, out of an allowance of $1.25tr, in mortgage-backed securities and more than $130bn, of $300bn, in Treasury bonds to help keep mortgage rates low. Keeping rates low lets people refinance their mortgages to reduce payments and stay in their homes. It also encourages them to consider snapping up bargains in the still-ailing housing market. Many analysts believe the Fed plans to hold these securities until they mature in 10 years or so, with no plans to sell them into the market, so the losses will probably never be realized.

Wall Street Journal