[s1artibartfast]

>> $1 after inflation is still $1. It is just that the value of $1 is now different.

>That is why we distinguish between 'real value' and 'nominal value.'

What will the real value of a $1 bond be on your balance sheet the day it matures? exactly $1

[chordalkeyboard]

> What will the real value of a $1 bond be on your balance sheet the day it matures? exactly $1

The real value in future-date dollars will be $1. In present-day dollars it is likely to be less, the ability to refer to which distinction is the purpose of the formal difference between nominal and real value.

[s1artibartfast]

I agree. The difference between the two converges to zero as your your comparison time frames go to zero.

Initial time for real dollar caluculation can be anything. You can ask what your real dollar salary is relative to 1950, or relative to 1951, or yesterday.

You can ask what was the real dollar salary in 1951 relative to 1950, or 2051 compared to 2050.

While I meant to write real dollars, I wish I wrote nominal, based on how much confusion it caused.

I still stand by the idea that it is silly, and not very useful to put a future return on investment on an asset list in to 2023 dollars using a 10 year inflation projection.

Then the reported asset would fluctuate based on your model, and you already know exactly where it will end on the maturation date.

[chordalkeyboard]

> Initial time for real dollar caluculation can be anything. You can ask what your real dollar salary is relative to 1950, or relative to 1951, or yesterday.

Regardless of which day's dollars we use as a baseline for comparison, a bond issued under at a lower interest rate is discounted relative to the same bond issued later at a higher interest rate. Quibbling about how we express this valuation suggests you don't understand this difference, but this difference is important to understanding the current day banking crisis.

> While I meant to write real dollars, I wish I wrote nominal, based on how much confusion it caused.

You still seem unaware that these meanings and words are a very well understood convention that you violated. The only confusion was the confusion you had in the meanings you assigned to the words.

> I still stand by the idea that it is silly, and not very useful to put a future return on investment on an asset list in to 2023 dollars using a 10 year inflation projection.

The main thing is that these valuation rules exist for reasons and while we could debate which rules are good etc., understanding the basics of bond valuation and the common terminology we use to discuss them is a minimum prerequisite and I'm still working on getting you on board with the basic terminology every one else is using.

There isn't much discussion to be had without a common vocabulary.

[s1artibartfast]

Im fine with your terminology and reference. The current date (or that of reporting) can be the reference time for a real dollar valuation.

I fully understand how bond market prices are impacted by interest rates. What most people seem ignorant of is the fact that bonds are not simply market trades asset, but are also have a value at maturity. Most people don't seem to know that HTM assets are reported separate from securities available for sale, which ARE tracked at market value.

And then there's the even stupider idea that the value of long-term assets should be listed as the maturation date npv, as if you can just look up future inflation rates for the next 10 to 30 years.

It seems obvious to me that if you never intend to sell a bond, the maturity value is a measure of interest.

Do you have anything else to add to the discussion, or was that your only point?

[chordalkeyboard]

> It seems obvious to me that if you never intend to sell a bond, the maturity value is a measure of interest.

The reason this matters is because in the case of a bank who needs the funds to operate then they very much might need to sell the bonds, or revalue them at NPV because of statutory requirements.

This entire discussion is because the NPV of HTM assets is now relevant.

[s1artibartfast]

That doesn't mean it is universally relevant, nor does it mean it is more relevant than the maturity value in the asset table.

Most importantly, Banks already DO report the unrealized losses and Fair market value on HTM securities. Just not in the assists section, but in a dedicated section on the HTM assets. It is not some big secret.

You can even look at it in silicon valley Banks filings if you want(1). They break down the HTM losses and fair market value plain as day starting on page 125.

At the time of filing, they reported a mature value of 91 billion, fair value of 76 million, and unrealized losses of 15 billion. They break it down by the duration of maturity and interest they earn on them. Everything someone could ask for is there.

It seems to me that this whole question of reporting fair market value instead of maturity in the asset table comes from people who have never read a 10-k filing and think there is some conspiracy.

SVBs HTM loss situation should have been no surprise to anyone looking. The real conspiracy is their HTM position was common knowledge.

https://www.sec.gov/Archives/edgar/data/719739/0000719739230...