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You need to dig into the bonds and understand what happened here. It wasn't 2%, it was about liquidity of those assets when the interest rates rose.
by frellus 4y ago
You need to dig into the bonds and understand what happened here. It wasn't 2%, it was about liquidity of those assets when the interest rates rose.
- fisherjeff 4y agoI think a more accurate description would be something like: 1) SVB deposits were suddenly up ~4x 2) Interest rates were ~0% and few customers needed loans 3) The only way to generate a spread (i.e., keep the doors open) was to buy long-dated securities 4) SVB crosses their fingers and hopes rates don’t rise 5) Oops, rates rise quickly, assets devalue quickly 6) SVB is a little tight on liquidity and wants very badly to avoid selling their devalued assets, but can probably ride it out, provided they can raise a little cash and don’t lose more than maybe 15-20% of their deposits per year 7) People get nervous 8) SVB loses an absolute shit ton of deposits 9) “Hi, we’re from the FDIC and you’re all fired”