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I understand your point but why does this have to keep happening and why must we normalize it? If I'm depositing my money in your bank is it not unreasonable to

by tjpnz 4y ago

I understand your point but why does this have to keep happening and why must we normalize it? If I'm depositing my money in your bank is it not unreasonable to expect you to act responsibly with it?

lmm 4y ago
They bought treasury bills, is that really irresponsible? Of course on Monday morning everyone says they were obviously being dumb not hedging their rate risk, but how many people were saying that before Friday?
- markus_zhang 4y ago
  They didn't properly hedge the bonds or they didn't anticipate the much spoken rate hikes. That's the irresponsible part. If that's as easy as buying treasury bonds then everyone can be a fund manager.
- nemo44x 4y ago
  Indeed. The government passed out money like candy and printed treasury’s to fund it at interests rates the Fed (who they hire) set at record lows. They then put into their own regulations that these are 0 risk assets and banks bought them to pay for depositors. Then the Fed decided to put rates at the highest level in 20 years.
- mertd 4y ago
  They had too much MBS with average maturity of 6+ years. T bills by definition mature in a year or less. T bills, if they had any, weren't the problem. https://www.netinterest.co/p/the-demise-of-silicon-valley-bank https://www.netinterest.co/p/the-demise-of-silicon-valley-ba...
  - heartbreak 4y ago
    Treasury bonds are not the same as treasury bills. Please please everyone stop commenting “facts” about stuff you’re not familiar with.
- oarabbus_ 4y ago
  they purchased 10 year treasuries and 15-30 year MBS. This is pretty irresponsible, a normal bond manager not yield chasing would have had a decent component allocated to 1-3 year treasuries. You can literally call up your 401k/403b provider tomorrow and ask for the bond fund/portfolios/allocations available. See if you can find any bond fund with no short-dated maturities. It's equivalent of having a 100% tech stock portfolio and not hedging sector risk. Maybe it isn't as irresponsible as going 100% into a single stock ticker, but it's still extremely irreponsible
- bewaretheirs 4y ago
  T-bills are short duration (up to 1 year). If they had stuck with T-bills they'd be in better shape today. SVB reportedly bought longer-duration US Treasury debt which is more sensitive; one source says their portfolio had an average duration of around 5.7 years, up from 4 years a bit over a year ago: http://twitter.com/MacroAlf/status/1634626136364679168 http://twitter.com/MacroAlf/status/1634626136364679168 The issue with longer-term debt is that if you need the money now, you can't force the issuer to redeem it before the bond matures - instead, you have to find someone else to buy the bond it from you. And if it's paying half the interest that a new issue would pay, nobody's going to give you face value.
alxmng 4y ago
No don’t talk about the elephant in the room (fractional reserve). That is the sacred dogma.

by tjpnz 4y ago

I understand your point but why does this have to keep happening and why must we normalize it? If I'm depositing my money in your bank is it not unreasonable to expect you to act responsibly with it?

lmm 4y ago

They bought treasury bills, is that really irresponsible? Of course on Monday morning everyone says they were obviously being dumb not hedging their rate risk, but how many people were saying that before Friday?

markus_zhang 4y ago
They didn't properly hedge the bonds or they didn't anticipate the much spoken rate hikes. That's the irresponsible part. If that's as easy as buying treasury bonds then everyone can be a fund manager.
nemo44x 4y ago
Indeed. The government passed out money like candy and printed treasury’s to fund it at interests rates the Fed (who they hire) set at record lows. They then put into their own regulations that these are 0 risk assets and banks bought them to pay for depositors. Then the Fed decided to put rates at the highest level in 20 years.
mertd 4y ago
They had too much MBS with average maturity of 6+ years. T bills by definition mature in a year or less. T bills, if they had any, weren't the problem. https://www.netinterest.co/p/the-demise-of-silicon-valley-bank https://www.netinterest.co/p/the-demise-of-silicon-valley-ba...
- heartbreak 4y ago
  Treasury bonds are not the same as treasury bills. Please please everyone stop commenting “facts” about stuff you’re not familiar with.
oarabbus_ 4y ago
they purchased 10 year treasuries and 15-30 year MBS. This is pretty irresponsible, a normal bond manager not yield chasing would have had a decent component allocated to 1-3 year treasuries. You can literally call up your 401k/403b provider tomorrow and ask for the bond fund/portfolios/allocations available. See if you can find any bond fund with no short-dated maturities. It's equivalent of having a 100% tech stock portfolio and not hedging sector risk. Maybe it isn't as irresponsible as going 100% into a single stock ticker, but it's still extremely irreponsible
bewaretheirs 4y ago
T-bills are short duration (up to 1 year). If they had stuck with T-bills they'd be in better shape today. SVB reportedly bought longer-duration US Treasury debt which is more sensitive; one source says their portfolio had an average duration of around 5.7 years, up from 4 years a bit over a year ago: http://twitter.com/MacroAlf/status/1634626136364679168 http://twitter.com/MacroAlf/status/1634626136364679168 The issue with longer-term debt is that if you need the money now, you can't force the issuer to redeem it before the bond matures - instead, you have to find someone else to buy the bond it from you. And if it's paying half the interest that a new issue would pay, nobody's going to give you face value.

alxmng 4y ago

No don’t talk about the elephant in the room (fractional reserve). That is the sacred dogma.