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A comment on Joint Statement by the Department of the Treasury, Federal Reserve, and FDIC. Parent comment

Re:Joint Statement by the Department of the Treasury, Federa... by citizen_friend on Monday March 13, 2023 @12:34AM (#35131118)
> 1000% return by buying treasuries

by buying with leverage? What percentage returns do you think would maintain their business?

[ Parent | on HN ]
Re:Joint Statement by the Department of the Treasury, Federa... by Aperocky on Monday March 13, 2023 @12:39AM (#35131151)
They would be perfectly safe have they dumped their deposits into T-Bills.

They didn't went for the 1000%, they went for the 5-10% extra and ended up losing everything.

Had they used T-Bills or even straight up depositing it against the Federal Reserve for NO return, they would remain liquid and could now reinvest into higher yield bonds as the rates have risen. Instead they now hold 1.5% 10 year HTM bonds that are now valued at 70% original today because the prevailing rate is 4.5%.

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Re:Joint Statement by the Department of the Treasury, Federa... by citizen_friend on Monday March 13, 2023 @12:44AM (#35131190)
To clarify I don't know the actual strategy they took. I am responding to how they can have risk in "make safe loans" or "buy safe bonds" scenario.

> They would be perfectly safe have they dumped their deposits into T-Bills.

How is this different than what you described? If the rate increases beyond the coupon of a 10 year treasury, its value drops. Are you referring to extremely short term treasuries?

[ Parent | on HN ]
Re:Joint Statement by the Department of the Treasury, Federa... by snuxoll on Monday March 13, 2023 @10:12AM (#35135955)
> Are you referring to extremely short term treasuries?

T-Bill: 52 weeks or less duration

T-Note: 2-10 year duration

T-Bond: > 10 year duration

[ Parent | on HN ]