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sure, there are things that are uncertain about economics, but there are a great many things that are understood as well. Within Finance, its understood that s
by orange_joe 3y ago
sure, there are things that are uncertain about economics, but there are a great many things that are understood as well. Within Finance, its understood that some things are riskier than others. SVB blew up because they opted to buy highly risky long dated, low yield bonds even when there was good reason to believe that the economy was entering an inflationary period.
- rippercushions 3y agoLow yield bonds are pretty much by definition the safest instrument around, that's why they're low yield. (High-yield aka junk bonds are the risky ones.) In SVB's case, the risk was not in the bonds themselves, but in the facts that a) there was a yawning mismatch between the high interest they needed to pay out on deposits to stay competitive and the low interest they were getting on their locked-in capital, and b) their customers were heavily concentrated in a single industry, namely fickle VCs and their companies.
- ethbr0 3y agoParent is taking issue with SVB's long date preference for the yield bump, which from a risk standpoint wasn't appropriate for their depositor base, in an inflationary environment.
- heavenlyblue 3y agoI think you just conpletely misunderstood what risk here meant.