3 ms·
Because the rate in long term bonds was 1.x% compared to 0% for the short term bonds. It was a risky move but one that could have panned out if the deposits ha
by muzz 4y ago
Because the rate in long term bonds was 1.x% compared to 0% for the short term bonds.
It was a risky move but one that could have panned out if the deposits had remained.
- NhanH 4y agoIt could only have panned out if the interest rate have remained. Once the interest rate increased, the deposits will chase higher rate, which SVB can’t provide and depositors will naturally withdraw their funds.
- muzz 4y agoTrue but that doesn't happen all at once. Rates have been rising for more than a year now (not in a straight line but overall of course). They could have unwound this carry trade in March 2022 and probably come out ahead. Had they waited until summer 2022 they probably would have had a small loss. As it turns out though they held on for bigger losses.