The Australian Office of Financial Management recorded mark-to-market losses of $72 million on its holdings of $9 billion in mortgage-backed securities as of June 2010, the agency's annual report shows.While the mark-to-market losses narrowed from 2009, they highlight the agency's willingness to invest in pools of mortgage-backed bonds at yields lower than those that prevail in the secondary market. This is a policy choice of the AOFM and reflects the Australian government's policy of making RMBS purchases to support funding for niche lenders in the home loan market.By 30 June 2010, the AOFM had invested in 28 RMBS transactions, totalling $9 billion, sponsored by 14 issuers. Including investments from other parties, the total volume of RMBS issued, with the support of the program since its inception, was $17.2 billion.The investments "are also providing reasonable financial returns", the AOFM said, providing an annualised return of 5.2 per cent. All the RMBS securities purchased under the program have been floating-rate notes, paying, as at 30 June 2010, a weighted average margin of 131 basis points over the one-month bank bill rate.The AOFM's cost of funds in 2010 was 5.05 per cent.