[pg314]

> If you hold a bond to maturity you get it’s NPV. Valuing it at NPV vs mark to market

The NPV calculation should use the market intrest rate. If you use that, it should be pretty much the same thing: an efficient market should value a bond at its NPV.

However, they were allowed to value HTM (hold to maturity) bonds at face value. That is just non-sensical from an economics perspective and just hides losses.

[fnordpiglet]

This is only true for treasuries which are risk free. Any other bond includes other confounding risk factors impacting price which come out in MTM. These were agency bonds so would include duration/prepayment risks. But you also can face substantial liquidity risks in a fire sale, if you mark your assets to the full liquidation value, you need to mark against an order book to the depth of your holdings. Simple HTM NPV assumes you don’t face these pricing risks because you are holding for par+interest, discounted at risk free rates.

[lordnacho]

This is the right answer. Everything that has a market should be marked to market. This should be the default decision until some kind of good reason it's given to do otherwise.