Yeah and interest rates have been very low for the past two decades, but anyone with knowledge especially in the financial sector knew 18+ months ago rates were going to be raised and by a lot. Why are banks holding onto the low yield treasuries of old, because they would have to realize the losses now which would lower the stock, reduce dividends, and bonuses today. Their greed before looking out for the customers, the old cliché of financial institutions will almost always be true and never change.
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Originally Posted by RickFLM4
Treasuries are the least risky investment a bank could hold from a default perspective and many are bought with the intent to hold them until maturity. Interest rate risk is another matter. As described in the article you linked, as the Fed has raised rates those older treasuries are worth less if traded, but still exceptionally safe if held to maturity. A run on any bank will cause a lot of hurt, particularly in rising rate environment.
I can get on board with questioning the wisdom of financial institutions buying investments that are so long and not rotating out of them before paper losses built up. I can also get on board with questioning the wisdom of expecting customers of a bank like SVB always being able to raise capital. But with the Fed keeping rates so low + perpetual QE and low inflation for decades, I’m not surprised by it.
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