[dragontamer]

6-month US Treasuries were 0.36% APY on January 19th, 2022.

1-month US Treasuries are 1.13% APY today, June 14th, 2022.

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So if you had bought a 6-month US Treasury on Jan 19th, you'd have a 1-month Treasury with .36% APY.

That's worth much much less than the current 1-month US Treasuries that are available, so you'd be forced to sell at a loss if customers requested their money back.

[thebean11]

> That's worth much much less than the current 1-month US Treasuries that are available

It's not 10% less, or anywhere close to it. You are only missing out on roughly (1/12) * (0.0113 - 0.0036) * (treasury amount) vs a 1 month treasury bought today..I'm having trouble finding a price chart for 1 month treasuries.

6-month is obviously more sensitive to the rate drop than 1 month, but the 10% number you are referencing is almost certainly for long term treasuries, not short term..

[dragontamer]

BND is down 12%, BSV is down 6.5% YTD.

BND is not "just" long terms, its a mix of all kinds of bonds. BSV is a mix exclusively of short term (~5 years or less).

VBLAX, Vanguard's long-term bond ETF, is down 23% YTD.

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Given how BND is largely composed of a mix of US Treasuries (of many different maturities), I think the 10% quickie estimate I gave earlier is correct. I'm buying/selling these things in my portfolio, so I've got a good idea of how they're performing.

[thebean11]

Short term for treasuries is generally considered <= 1 year, BSV is only 1 to 5 years.

I just looked it up, Circle says they only hold treasures that mature in <= 3 months, so yeah I think even 6.5% is a massive overestimate to how volatile their treasury portfolio is..probably more like <1% which is easy to cover if they just hold a tiny bit of the deposits in cash..

[dragontamer]

> Short term for treasuries is generally considered <= 1 year, BSV is only 1 to 5 years.

BSV is literally named "Vanguard Short-Term Bond ETF".

That being said, the only "standardized" terms I'm aware of are Bills (less than 1 year), bonds (greater than 10 years), and Notes (1 to 10 years).

In any case, it is clear that BSV is considered short-term by Vanguard and its investors. So I'm more than willing to believe in Vanguard's language over yours.

[thebean11]

haha, ok, so now we're just quibbling over the definition of short term instead of discussing the concrete question of how volatile USDC's treasuries are? Just replace instances of "short term" with <= 3 months, now are we in agreement?

My point is that your 10% figure is not applicable to the treasuries Circle claims to hold. You can call them whatever you want.

[dragontamer]

The Fed is about to raise rates by 0.75% (estimated, maybe 0.5% to 1%) this week.

What do you think will happen to the value of all those treasuries? Even short term ones will decline in value. Not only because of the actual rate increase, but also over the expectation of future rate increases to clamp down on inflation.

10% drop? Probably not. But any drop in price followed by a bankrun would end up in insolvency.

[FabHK]

I'd assume short term is 3 years or less, so make it a 2y duration on average, and assume rates went up by 2%, then we are talking about a 4% loss, not 10%.

Still, previously I didn't want to hold USDT anymore; now I don't want to hold USDC anymore either.