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> SVB is now forced to sell the mortgages it bought for $100 for $75. Not quite. The article addresses this in detail. They bought mostly hold-to-maturity (HTM
by mypalmike 4y ago
> SVB is now forced to sell the mortgages it bought for $100 for $75.
Not quite. The article addresses this in detail. They bought mostly hold-to-maturity (HTM) bonds which could not be sold.
(Technically such bonds could be sold, but selling would trigger a portfolio revaluation of all their HTM bonds, which would have made them immediately insolvent.)
- zby 4y agoHere is a quote I found in the article: "The decision dictates whether the securities are designated as “held-to-maturity” (HTM) assets " - HTM was an internal designation - an accounting convention. It does not have anything to do with the bond terms.
- mypalmike 4y agoI'm not an expert. But it appears to be an accounting designation that shows up in filings, so it's not purely internal. You are correct that they are not part of the bond terms, which I was unclear on before. "HTM assets are not marked to market... they remain glued to balance sheets at amortised cost regardless. By contrast, AFS assets are marked-to-market... Sell even a single bond out of an HTM portfolio, however, and the entire portfolio would need to be re-marked accordingly." There's a bit more detail here, but it doesn't get into the re-marking aspect. https://www.investopedia.com/terms/h/held-to-maturity-security.asp https://www.investopedia.com/terms/h/held-to-maturity-securi...