[nthj]

SVB has a ton of bonds that mature (will be cashable) after ten years, but nobody wants to pay for them today because they can make more money placing their cash in a savings account. For a silly analogy, imagine if you had a bunch of cash locked up in a CD, but also had a surprise medical bill. Our parents could very easily look at your books and say “huh, I can advance you 80% of your CD because there is really no chance the CD won’t pay me back once it matures.” Is this a bailout? I don’t think so. It’s different than paying off our drunk uncle’s gambling debts for the 7th time.

And also we probably don’t want to say “haha silly SVB customers, they can wait ten years to get their money back” because none of us want to live in a world where most Americans, most of whom don’t understand all these complexities, start runs on ALL the banks because they think this is the start of a collapse. It becomes self-fulfilling at that point.

[bentlegen]

In terms of real dollars, those bonds will be worth less in 10 years because of inflation.

You’re correct in highlighting that if they fronted the cash now the bonds would be less, but it is simultaneously true that they will be worth less “2023 dollars” in 10 years.

We are currently working with 2023 dollars.

[aziaziazi]

Your analogy is not only silly but naïve. SVB is way closer to your drunk uncle saving in 30yo whiskeys pricy bottles than child savings.

[strbean]

Treasury bonds are wild and irresponsible investments now?

Man, it's probably time to jump ship from the US economy all together.

[hamadj]

Treasury bonds are not irresponsible. What is irresponsible is to not hedge your interest rate risk in the form of interest rate swaps. Most other conventional banks do exactly that; they have a portfolio of held-to-maturity (HTM) securities that they hedge with interest rate swaps to avoid bearing that risk. In the financial sector, you only leave unhedged the investments you are _actually_ betting on; if you are to say that they were betting on 10y bonds (until maturity) holding the same value as the day they bought them, without any form of risk management, I would consider that irresponsible.

[mnadkvlb]

Its not as clear as treasuries are safe or not. The price function is clearly dependent on term.

long term treasuries are extremely risky assets, by definition and move a lot on interest rates. whereas short term treasuries like less than three momths barely move on fed rates, hence much safer.

Svb bank made the wrong choice of holding super long duration treasuries. They knew what they were getting into, and did it anyway for higher yield at that time. they could have put the money in 3 month expirations and wouldnt have been in this situation.

[lordfrito]

If you're a bank that can't differentiate/navigate long term vs short term debts while experiencing ballooning deposits, then yes I agree it's time to jump ship and find a new profession.

I don't see how the US economy is to blame for the actions of a greedy monoculture based on "tech line go up". They made a long term bet on bonds with historically low interest rates, doubling down that the party would continue indefinitely. They didn't have a chief risk officer for 9 months! How is that the US economy's fault?

There's a reason they lobbied congress to weaken risk regulations.

I'm hoping people go to jail over this.

[friend_and_foe]

I didn't ask about SVB.