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I do not think this is a problem of mortgage-backed securities. The problem is that SVB tied up their liquidity for 10 years at a yield far lower than they wou
by zomglings 4y ago
I do not think this is a problem of mortgage-backed securities.
The problem is that SVB tied up their liquidity for 10 years at a yield far lower than they would get with more secure investments after the FED's rate hikes.
The specific assets they invested into are immaterial.
- snuxoll 4y agoAye, the mistake was the duration, not the instrument. I hope nobody would take 60% of their brokerage account and invest it in a 10 year bond either, ladders exist not just to manage liquidity but also to limit the duration you have to suffer low yields with.
- mannerheim 4y agoYep. Let's not forget this same thing pretty much happened last year in the UK - pension funds got margin called because they borrowed money to buy gilts (UK gov bonds). Low interest bonds, money tied up, messed them up when interest rates rose.