Thursday, March 16, 2023

About Those ‘Safe’ Silicon Valley Bank Treasurys

About Those ‘Safe’ Silicon Valley Bank Treasurys - By The Editorial Board
  • Any asset can blow up a bank if monetary policy is bad enough
"...SVB held boring Treasurys and highly rated mortgage-backed securities in large quantities.
  • How could these supposedly safe assets go wrong?
...But what about interest-rate risk
For at least 15 years the Fed and other central banks have downplayed this risk—through their regulatory policies and their loquacious forward guidance concerning monetary policy. 
Their promises to suppress interest rates to abnormally low levels for extended periods encouraged banks and others to believe sovereign bonds would hold their market value.
But not forever, it turns out...

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