5 ms·
Just hold the bond to maturity.
by Yrlec 4y ago
Just hold the bond to maturity.
- ivalm 4y agoBut that’s not an option if you have to pay out now.
- hackernewds 4y agoThat's a liquidity crisis
- ummonk 4y agoIt's insolvency if the current market value (not the hold to maturity value) of the assets is less than the liability. As far as I can tell though, SVB was solvent despite its losses, and just needed to raise money to cover reserve requirements after it realized the losses. What did it under was a lack of liquidity after everyone panicked and did a run on the bank, with 45 billion (out of ~175 billion in deposits) in withdrawals overnight.
- user_named 4y agoThere's no reserve requirements
- ivalm 4y agoIt started as a liquidity crisis (do they had to start selling or raise capital), it turned into a solvency crisis (they had to sell even more therefore marking assets as available for sale which made them marked to market). Right now SVB, if fully liquidated, cannot repay all of the deposits.
- zarzavat 4y agoLet’s say I owe $100. If I have assets worth $110 today but they are locked up, and I have to pay back what I owe today, then I’m facing a liquidity crisis. If I have assets worth $90 today, but $110 in a few years, and I have to pay back the money I owe in a few years, then I’m solvent and everything is good. If I have assets worth $90 today, but $110 in a few years, and I have to pay back what I owe today then I’m insolvent.
- Blackthorn 4y agoPeople aren't waiting ten years for their money.
- Aeolun 4y agoI’m inclined to say they will if it guarantees they get it back.
- gruez 4y agoBut a dollar in 10 years is worth less than a dollar today. In either case the result is the same: you take a haircut on the present value of your deposits.
- flangola7 4y agoNo but $1 in ten years will be worth more than $0.50 today.
- Blackthorn 4y agoSpecifically, it's worth about $0.65 today.
- bryfb 4y agoA $100 in 10 years is just not worth $100 today in the current interest rate environment.