3 ms·
A ten year 1% bond is worth about 70 cents on the dollar. Ten years from now it will be worth 100 cents on the dollar, but you can buy or sell it at 70 cents o
by cperciva 4y ago
A ten year 1% bond is worth about 70 cents on the dollar. Ten years from now it will be worth 100 cents on the dollar, but you can buy or sell it at 70 cents on the dollar, so that's what it's worth.
- comte7092 4y ago>Ten years from now it will be worth 100 cents on the dollar Yes… so if you hold it, that is exactly what it is worth. The issue is that they are forced to sell. We’re literally talking in circles. If you are forced to sell on most assets, you are going to take a hit on your books, that doesn’t suddenly mean that the asset was valued incorrectly.
- istjohn 4y agoIf you don't value an asset for what you can get on the open market, then you are valuing it incorrectly.
- comte7092 4y agoI can see how you might have that opinion, but it isn’t in like with generally accepted accounting practices on multiple levels.
- deleted 4y ago[deleted]
- cperciva 4y agoIf they had held 3-month treasuries instead of 10-year bonds, the bank run would have been a non-issue since they could have liquidated the treasuries at the same price as they were listed on SVB's books. They didn't become insolvent because of the bank run. The bank run exposed the fact that they were already insolvent.
- rocqua 4y agoDo remember that the SVB wasn't paying much interest on their deposits. They were making profits on those bonds. The only real problem was a maturity mismatch that happened to matter.