Re:SVB shows that there are few libertarians in a financial ...
by toast0 on Monday March 13, 2023 @04:45PM
(#35142283)
> If you hold a bond to maturity you get it’s NPV. Valuing it at NPV vs mark to market has more to do with your plan than any sort of fundamental truth - they’re both legitimate ways of valuing it.
If you hold a bond to maturity, you get it's Net Present Value at maturity which is actually Net Future Value. Mark to market of treasury bonds is essentially the NPV of the bond, considering current interest rates. When interest rates are near zero, sure, a dollar today and a dollar tomorrow are the same, with significant interest rates, they aren't. And there's the problem.
You can't give a depositor a $100 treasury bond, due in 2028, when they want $100 now. That's only worth $85 today (or whatever the value is, I dunno).
If you hold a bond to maturity, you get it's Net Present Value at maturity which is actually Net Future Value. Mark to market of treasury bonds is essentially the NPV of the bond, considering current interest rates. When interest rates are near zero, sure, a dollar today and a dollar tomorrow are the same, with significant interest rates, they aren't. And there's the problem.
You can't give a depositor a $100 treasury bond, due in 2028, when they want $100 now. That's only worth $85 today (or whatever the value is, I dunno).