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SVB's collapse shows the world's favorite safe asset isn't risk-free
By Liz McCormick, Ben Holland and Edward Harrison
Bloomberg News
Wednesday, March 29, 2023
Look deeper into the latest U.S. banking crisis and the cause may come as a surprise to anyone still thinking in terms of the crash of 2008.
It wasn't dodgy loans to impecunious homebuyers that sank Silicon Valley Bank. It was a stash of what are thought to be the safest securities on Earth: U.S. Treasuries.
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Those loans to the government were, of course, entirely safe in a very important sense. Uncle Sam is going to be good for the cash. (Set aside an unforeseen disaster with the debt ceiling -- more on which in a moment.)
But the final repayment date of SVB's bonds was typically years away. The problem is what happens to their price in the meantime.
Purchased during a time of ultra-low interest rates, those long-maturity Treasuries were always liable to lose their immediate resale value if rates took off -- which they have done in a big way over the past year. ...
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