Re:America’s banks are missing hundreds of billions of dollars
by kgwgk on Wednesday March 22, 2023 @02:57AM
(#35257705)
> Interest rates for short term debt are at 0%, at these rates you will run at a loss. Your only choice to keep your bank competitive is to find any yield at all […] Of course the flaw in this story is that the interest rate risk should have been hedged, and it wasn’t.
If you buy long-term Treasuries for the high yield with and you hedge the interest risk rate… what you get is the yield of the short-term treasuries. Why buy them in the first place then? (There is no credit risk in this case - if you neutralize the interest rate risk there is nothing left.)
If you buy long-term Treasuries for the high yield with and you hedge the interest risk rate… what you get is the yield of the short-term treasuries. Why buy them in the first place then? (There is no credit risk in this case - if you neutralize the interest rate risk there is nothing left.)