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A great article explaining the SVB predicament.

The Banking Accidents Have Started

From the article :

As their customers did not need as many loans, the deposits were parked in 'safe' securities: These holdings rose from $28 billion to $125 billion, purchased mostly at abnormally low yields.

While these bonds did not have any risk of default, they were still exposed to interest-rate risks (bonds fall in value as interest rates rise).

These losses initially remained on paper, but became manifest when the bank had to sell the bonds to service customer requests for deposit withdrawals. This concern was what drove the bank run.


Apparently, just parking the funds in a safe place isn't enough. Important to make them relatively inflation proof, otherwise you may run badly short when you need to spend that money.


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