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> But… they aren’t real yet? Barring something extremely abnormal happening, aren't low-yield bonds seeing real losses already due to inflation? Like it doesn
by nostrebored 4y ago
> But… they aren’t real yet?
Barring something extremely abnormal happening, aren't low-yield bonds seeing real losses already due to inflation?
Like it doesn't have to be the spot price we're talking about, aren't many of them toxic already and others expected to track there?
- klooney 4y ago> aren't low-yield bonds seeing real losses already due to inflation? But bank deposits aren't in inflation adjusted dollars.
- bombcar 4y agoThis is true, but there can be a lot of slight of hand when talking about dollars and future dollars. Banks run on nominal dollars, and SVB would have remained capitalized if withdrawals hadn't overwhelmed their ability to get ready cash, which caused them to sell at a loss, which spooked everyone, causing a run.
- nostrebored 4y agoRight, but if they're expected to be toxic you would mark them down nominally as well. It's not like the real losses aren't also nominal when realized. And whether the metric you care about is the real losses or the expected nominal value at maturity depends on whether inflation continues to raise. As this also suggests interest rates increase, you get hammered on both sides.
- s1artibartfast 4y agoNo, because they still are with the same number of dollars, it it just that the dollar itself is worth less that it was. If you say you have $100 worth of bonds, this is accurate at all points of time you hold it. What you can buy with $100 may be changing from year to year.