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That TLT story is being severely under-reported.

mnadkvlb 4y ago
TLTs value went down because yields went up. This is by design, anyone who invested in TLT at zero rates should have known the yields to price function. Honestly i dont see whats to hide here in reporting ?? Can you explain what am i missing here ?
- toomuchtodo 4y ago
  You’re not missing anything. If you invested in mid to long duration bonds right before the Fed started rocketing rates, you had a bad time.
  - mnadkvlb 4y ago
    again, why would i put my money in bonds when the interest rates are rock bottom ? I invest in treasuries when interests are high or gonna stay high. If i see us hitting a recession in coming year, i keep mostly cash and start piling into treasuries over each hike cycle until at least the central banks start cutting rates and keep riding the treasuries till rates keep moving down. Or in other words, dont fight the fed
    - Octokiddie 4y ago
      You might not, but many banks and other institutions have no choice.
- ivalm 4y ago
  You’re right, but it is also the answer as to why the boring treasuries Silvergate held got devalued.
- Octokiddie 4y ago
  Many financial institutions are required by law to hold UST, some of which have suffered declines comparable to TLT. This was in part a result of regulations post-GFC. I'm surprised there hasn't been more reporting about this. Maybe everything's fine and there's nothing to see here.
  - quickthrowman 4y ago
    If a bank classifies their long-duration Treasurys as held-to-maturity, they don’t need to mark the fluctuating value of the bond principal to market. [0] Also, most other banks aren’t overly concentrated in one area that could collapse and force a bunch of customer withdrawals like Silvergate was (in cryptocurrency) If there was a problem in banking bond holdings, it likely would’ve surfaced by now with the massive interest rate changes. [0] https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/loans_and_investment/loans_and_investment_US/chapter_3_accounting__1_US/34_accounting_for_de_US.html https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/loa...
quickthrowman 4y ago
What do you mean underreported? TLT losing value isn’t news. The average duration of TLT’s US Treasurys is ~20 years—if rates go up 1%, the bond principle value goes down ~15-20%. The 20y treasury yield went from ~2% in Jan22 to 4% in Mar23, and TLT went from $150->$100 in the same time period. Anyone who knows what TLT is likely knows about duration risk. https://www.fidelity.com/learning-center/investment-products/fixed-income-bonds/duration https://www.fidelity.com/learning-center/investment-products...
dragontamer 4y ago
Under-reported by who? Virtually everyone I know has been watching the Fed / FFR and the rate-hike news because it affects things like long-term treasuries very significantly. The FFR going from 0% to 4.5% over the last year is probably the biggest, most important (and definitely well reported) piece of news... and constantly makes front-page material on most financial newspapers I've been reading. The idea that this is somehow "underreported" is... odd... to me. The amount of commentary on rising interest rates, federal fund rates, hawks in the Fed, inverted yield curves and more suggests that the public is hyper-aware of this and the implications.
- Octokiddie 4y ago
  I should have phrased it differently. The potentially large unrealized capital losses on UST sitting on bank balance sheets has been under-reported. Banks are both required to hold UST and not always required to mark-to-market. This interest rate move has been massive relatively speaking, leaving some number of banks in a terrible capital position, just waiting for a disturbance (like the FTX implosion) to trigger run-like conditions. This story sketches a problem that hopefully doesn't start to gather steam: https://www.axios.com/2023/03/04/why-some-banks-are-heading-toward-insolvency https://www.axios.com/2023/03/04/why-some-banks-are-heading-...

TLTs value went down because yields went up. This is by design, anyone who invested in TLT at zero rates should have known the yields to price function. Honestly i dont see whats to hide here in reporting ?? Can you explain what am i missing here ?

toomuchtodo 4y ago
You’re not missing anything. If you invested in mid to long duration bonds right before the Fed started rocketing rates, you had a bad time.
- mnadkvlb 4y ago
  again, why would i put my money in bonds when the interest rates are rock bottom ? I invest in treasuries when interests are high or gonna stay high. If i see us hitting a recession in coming year, i keep mostly cash and start piling into treasuries over each hike cycle until at least the central banks start cutting rates and keep riding the treasuries till rates keep moving down. Or in other words, dont fight the fed
  - Octokiddie 4y ago
    You might not, but many banks and other institutions have no choice.
ivalm 4y ago
You’re right, but it is also the answer as to why the boring treasuries Silvergate held got devalued.
Octokiddie 4y ago
Many financial institutions are required by law to hold UST, some of which have suffered declines comparable to TLT. This was in part a result of regulations post-GFC. I'm surprised there hasn't been more reporting about this. Maybe everything's fine and there's nothing to see here.
- quickthrowman 4y ago
  If a bank classifies their long-duration Treasurys as held-to-maturity, they don’t need to mark the fluctuating value of the bond principal to market. [0] Also, most other banks aren’t overly concentrated in one area that could collapse and force a bunch of customer withdrawals like Silvergate was (in cryptocurrency) If there was a problem in banking bond holdings, it likely would’ve surfaced by now with the massive interest rate changes. [0] https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/loans_and_investment/loans_and_investment_US/chapter_3_accounting__1_US/34_accounting_for_de_US.html https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/loa...

quickthrowman 4y ago

What do you mean underreported? TLT losing value isn’t news. The average duration of TLT’s US Treasurys is ~20 years—if rates go up 1%, the bond principle value goes down ~15-20%. The 20y treasury yield went from ~2% in Jan22 to 4% in Mar23, and TLT went from $150->$100 in the same time period. Anyone who knows what TLT is likely knows about duration risk. https://www.fidelity.com/learning-center/investment-products/fixed-income-bonds/duration https://www.fidelity.com/learning-center/investment-products...

dragontamer 4y ago

Under-reported by who? Virtually everyone I know has been watching the Fed / FFR and the rate-hike news because it affects things like long-term treasuries very significantly. The FFR going from 0% to 4.5% over the last year is probably the biggest, most important (and definitely well reported) piece of news... and constantly makes front-page material on most financial newspapers I've been reading. The idea that this is somehow "underreported" is... odd... to me. The amount of commentary on rising interest rates, federal fund rates, hawks in the Fed, inverted yield curves and more suggests that the public is hyper-aware of this and the implications.

Octokiddie 4y ago
I should have phrased it differently. The potentially large unrealized capital losses on UST sitting on bank balance sheets has been under-reported. Banks are both required to hold UST and not always required to mark-to-market. This interest rate move has been massive relatively speaking, leaving some number of banks in a terrible capital position, just waiting for a disturbance (like the FTX implosion) to trigger run-like conditions. This story sketches a problem that hopefully doesn't start to gather steam: https://www.axios.com/2023/03/04/why-some-banks-are-heading-toward-insolvency https://www.axios.com/2023/03/04/why-some-banks-are-heading-...