[arcticbull]

> No bank / institution today probalby wants older bonds that yield e.g. 1% if bonds issued today yield 3.5% and the Fed interest rate is 4.75-5.00%.

This is the whole 'mark to market' loss thing. If I have a treasury at 4% that I want to liquidate - but new ones are being issued at 5% - I can still do so instantly. I have to make up that 1% myself in cash, though. The 'loss' is the amount I have to come up with to make my treasury equivalent to a new one.

Inflation doesn't factor in.