[oivey]

They aren’t a fund. They’re a bank. The alternative is exactly what GP just told you: a portfolio of bonds with varying maturity dates. Varying maturity dates reduces your risk in the case where you need to sell to get cash immediately because if interest rates go up, then you may have to sell at a loss. You may have to sell at a loss because it may be more profitable to buy a new bond than sit on your low interest bond, so you have to reduce the price of your bad bond to compete.

It really does seem like a ludicrous bet to be so invested in long term bonds at a moment of historically low interest rates. That’s why it reads like greed. SVB seemingly did very little to reduce the risk on that absurd bet.

[Zetice]

I still don't get why not 30 yr notes, though, if this really was just greed.

[mrguyorama]

Maybe the people who were stupid enough to lock up over half their balance sheet for ten years were smart enough to not do it for 30? Most financial people who take a stupid risk to chase yield don't think they are taking a stupid risk. They, through self delusion or other means, convince themselves it is a sure bet.