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Weren't there 3 or 4 banks that went bankrupt at the start of the year, because they underestimated the risk of holding "the world's safest security"?
by username332211 3y ago
Weren't there 3 or 4 banks that went bankrupt at the start of the year, because they underestimated the risk of holding "the world's safest security"?
- smileysteve 3y agoNot because the security wasn't safe, but because they held too much of it at an unprofitable rate, and effectively illiquid because of its maturity date. The likely reason you see banks offering high interest CDs, is because it facilitates them slowly rolling over their long term bond portfolios by attracting CD investment. Especially if they are beating the 1 yr treasury rate, they are losing money to lose less than they would rolling over their bonds. An unfortunate thing for the banks is that CDs aren't as attractive as they were in the past because technology (ETFs, internet brokers) have made treasuries more accessible
- bookofjoe 3y agoIndeed! After I read the primary HN submission I soon found https://www.treasurydirect.gov/ https://www.treasurydirect.gov/ where in about 10 minutes I was able to open my own personal online account so that now I can buy T-Bills from home with no service charge etc.