Emergency bridge loan for SVB customers • Hacker News Board

Re: Emergency bridge loan for SVB customers

#131

Post by [deleted] » Sat, Mar 11, 2023, 4:56 AM UTC

Dylan16807 wrote: post #128

anonu wrote: post #67

Earlier quoted context omitted.

Over exposed to US treasuries? I don't think anyone has put those words together before. It's like saying they were over exposed to cash. You're saying a bank run occurred because they had a duration mismatch on US government debt where maturities were less than 1 year. I don't buy that explanation at all...

Let's say you're a bank. You have $1B in deposits. You use it to buy bonds that will be worth $1.1B in 2030. All good so far. Then the government starts selling those bonds a lot cheaper. To buy the same bonds you have today would only cost $900k. Even though the 2030 value of those bonds is the same, the 2023 value just plummeted. (And they will gain more per day to eventually make up the difference.) When your cust…

[deleted]

Re: Emergency bridge loan for SVB customers

#132

Post by arcticbull » Sat, Mar 11, 2023, 5:01 AM UTC

nostromo wrote: post #76

anonu wrote: post #67

Earlier quoted context omitted.

Over exposed to US treasuries? I don't think anyone has put those words together before. It's like saying they were over exposed to cash. You're saying a bank run occurred because they had a duration mismatch on US government debt where maturities were less than 1 year. I don't buy that explanation at all...

Treasuries can and do lose value. They are not like cash which does not lose face value. Long term treasuries have declined 40% in value since they peaked in 2020. https://www.google.com/finance/quote/TLT:NASDAQ Banks hold a lot of treasuries as part of their capital requirements. So long as they intend to hold them to maturity, they don't have to mark them to market. Banks collectively hold about $620 billion in los…

> Treasuries can and do lose value. They are not like cash which does not lose face value.

> Long term treasuries have declined 40% in value since they peaked in 2020.

This is inaccurate. What you linked to (TLT) aren't bonds, these are bond funds. The way a bond ETF works is that they have a stack of bonds that track the benchmark interest rate. They periodically sell off their old bonds and buy new ones, they don't just sit on them and wait for them to mature. That means TLT's NAV goes down when interest rates go up because they're selling lower interest rate bonds, and buying higher interest rate bonds.

Treasuries cannot lose value just like cash. They are as good as cash in almost every context. You can always sit on them until they mature and you'll get the full amount plus interest. You cannot lose money this way.

Where you can lose money though is if you have to liquidate them sooner. Why would someone buy a 3% 30y treasury for $X from you when they can get a 4% 30y treasury from the source for the same price? You have to sweeten the deal by paying out the difference in rates. This is where you can lose money.

SVBs issue was a mismatch in durations. They had too many demands for money out now, and too little available now. They have plenty of money coming in the future, but that's too late.

Re: Emergency bridge loan for SVB customers

#133

Post by arcticbull » Sat, Mar 11, 2023, 5:14 AM UTC

dehrmann wrote: post #40

ttsgeysygd wrote: post #28

Earlier quoted context omitted.

Word is that 50% of assets already sold by FDIC. Which will allow a large chunk of each account to be unfrozen by Wed so companies can make payroll. FDIC is not fucking around. Hat tip to them. Balance to take 2-3 months. Will require an actual application and paperwork.

> Hat tip to them Depends on the price they got for those assets.

Treasuries are the probably the single most liquid market on the face of the earth.

Re: Emergency bridge loan for SVB customers

#134

Post by [deleted] » Sat, Mar 11, 2023, 5:34 AM UTC

fairity wrote: post #126

ttsgeysygd wrote: post #28

Earlier quoted context omitted.

Word is that 50% of assets already sold by FDIC. Which will allow a large chunk of each account to be unfrozen by Wed so companies can make payroll. FDIC is not fucking around. Hat tip to them. Balance to take 2-3 months. Will require an actual application and paperwork.

Source?

[deleted]

Re: Emergency bridge loan for SVB customers

#135

Post by maximilianroos » Sat, Mar 11, 2023, 5:46 AM UTC

arcticbull wrote: post #132

nostromo wrote: post #76

Earlier quoted context omitted.

Treasuries can and do lose value. They are not like cash which does not lose face value. Long term treasuries have declined 40% in value since they peaked in 2020. https://www.google.com/finance/quote/TLT:NASDAQ Banks hold a lot of treasuries as part of their capital requirements. So long as they intend to hold them to maturity, they don't have to mark them to market. Banks collectively hold about $620 billion in los…

> Treasuries can and do lose value. They are not like cash which does not lose face value. > Long term treasuries have declined 40% in value since they peaked in 2020. This is inaccurate. What you linked to (TLT) aren't bonds, these are bond funds . The way a bond ETF works is that they have a stack of bonds that track the benchmark interest rate. They periodically sell off their old bonds and buy new ones, they don'…

A HN comment for the ages.

Reply to two basically correct statements, make a claim that's completely false, and then — and here's the genius — say a bunch of true statements that come around to support the view you're disagreeing with!

Re: Emergency bridge loan for SVB customers

#136

Post by [deleted] » Sat, Mar 11, 2023, 5:58 AM UTC

arcticbull wrote: post #132

nostromo wrote: post #76

Earlier quoted context omitted.

Treasuries can and do lose value. They are not like cash which does not lose face value. Long term treasuries have declined 40% in value since they peaked in 2020. https://www.google.com/finance/quote/TLT:NASDAQ Banks hold a lot of treasuries as part of their capital requirements. So long as they intend to hold them to maturity, they don't have to mark them to market. Banks collectively hold about $620 billion in los…

> Treasuries can and do lose value. They are not like cash which does not lose face value. > Long term treasuries have declined 40% in value since they peaked in 2020. This is inaccurate. What you linked to (TLT) aren't bonds, these are bond funds . The way a bond ETF works is that they have a stack of bonds that track the benchmark interest rate. They periodically sell off their old bonds and buy new ones, they don'…

[deleted]

Re: Emergency bridge loan for SVB customers

#137

Post by ivalm » Sat, Mar 11, 2023, 6:01 AM UTC

hackernewds wrote: post #45

ivalm wrote: post #15

Earlier quoted context omitted.

But that’s not an option if you have to pay out now .

That's a liquidity crisis

It started as a liquidity crisis (do they had to start selling or raise capital), it turned into a solvency crisis (they had to sell even more therefore marking assets as available for sale which made them marked to market).

Right now SVB, if fully liquidated, cannot repay all of the deposits.

Re: Emergency bridge loan for SVB customers

#138

Post by ivalm » Sat, Mar 11, 2023, 6:04 AM UTC

ummonk wrote: post #52

ivalm wrote: post #14

Earlier quoted context omitted.

No, SVB was solvent as long as their assets didn’t have to marked to market, once there was a bank run they became insolvent. If the SVB assets are liquidated they will not cover the deposits.

They were still solvent despite the mark to market losses - they just couldn't meet reserve requirements (and planned to raise money through a stock sale to that effect) after the assets were marked to market. Meeting reserve requirements is a much higher bar than simply having assets worth more than liabilities.

That is not true. They initially had some withdrawals that they hoped to raise for, then it spiraled and they had to mark-to-market a larger portion of their portfolio which made them insolvent. Right now they are insolvent (they are also illiquid, but that's a smaller issue).

Re: Emergency bridge loan for SVB customers

#139

Post by ummonk » Sat, Mar 11, 2023, 6:21 AM UTC

MrMan wrote: post #99

ummonk wrote: post #52

Earlier quoted context omitted.

They were still solvent despite the mark to market losses - they just couldn't meet reserve requirements (and planned to raise money through a stock sale to that effect) after the assets were marked to market. Meeting reserve requirements is a much higher bar than simply having assets worth more than liabilities.

this is a lie, I am petty sure. why are you posting this stuff

I mean we'll find out shortly enough. If they can't find a buyer for SVB, then it's likely insolvent. If they do then it's obviously solvent.

Re: Emergency bridge loan for SVB customers

#140

Post by ummonk » Sat, Mar 11, 2023, 6:23 AM UTC

mbreese wrote: post #94

ummonk wrote: post #60

Earlier quoted context omitted.

I understand how they ended up with losses, having bought long duration securities at the top. I'm saying they were still solvent despite the losses. They just weren't liquid.

Solvent relative to the maturity date on the bonds though, right? If you need a closer date (because you need to fulfill customer cash flow requests), then solvent plus illiquid can become insolvent quickly.

No I think more likely than not it's outright solvent if you look at current market value of the bonds. We'll find out by Monday whether it has been acquired or not.