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> > 97% of these MBS were 10+ year duration, with a weighted average yield of 1.56%. But why didn't they just hold money at the Fed given that they are a bank
by JumpinJack_Cash 4y ago
> > 97% of these MBS were 10+ year duration, with a weighted average yield of 1.56%.
But why didn't they just hold money at the Fed given that they are a bank and they can?
It's literally splitting hairs between what the Fed Fund Rate is and what they got on their MBS.
Explainer post says end of 2021 they made that trade, in March the Fed raised the Fed Fund Rate to 0.20%, and by April it was 0.77%.
Had they waited just 5 months they'd have got a better Risk adjusted return by just keeping the money at the Fed
- jwozn 4y agoYeah, but banks don't profit by holding money for months.
- gerad 4y agoIf they could have forecasted the future at that point, they could have made even more money than that!
- BobbyJo 4y agoIf you could forecast even 6 hours into the future, you'd be the richest man alive in weeks. Nevermind months.
- zenlikethat 4y agoBecause people can’t see the future and you’re talking do we forgo $1b a year or not in that spread. It wasn’t the MBS that got them into trouble, they were supposed to hold those to maturity. It was something else they did that led to that forced liquidation