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Risk management has far more depth and consequences than you realise. For example, by far the safest form of investment would be 10yr T-bills held to maturity.
by Out_of_Characte 3y ago
Risk management has far more depth and consequences than you realise. For example, by far the safest form of investment would be 10yr T-bills held to maturity. Which is what SVB had. The Fed made their paper value worthless because of the high interest rate they set. If they were greedy and opted for highest yield then there would have been a good chance that they stuck around longer.
Problem is that I'm not sure wether to blame the fed or the banks.
- sudosysgen 3y agoLong term treasury bills never were the safest investment. That would be short term treasuries. Interest rate risk is not a novel concept.
- shreyshnaccount 3y agoalso this doesn't take into account the duration gap between the assets and the liabilities.
- swexbe 3y ago10yr T-bills don't exist. Bills have a <= 1 year maturity. What you are talking about is either treasury bonds or treasury notes.
- mmarq 3y agoIt’s totally irresponsible to invest in 10 year government bonds, without hedging duration risk, especially if your clientele is SVB’s clientele. But doing so would have dampened the short term gains that paid bonuses for a few quarters.
- watwut 3y agoNo, SVB has irresponsible strategy and pretty much everyone who works in the field knew it was irresponsible strategy. This was 100% SVB fault and 0% Fed fault.