Balaji
over 2 years ago
The Fed itself admits that it's providing guidance to investors. t.co/04V3b1WlBN t.co/y1X7WmzsER t.co/0Z63INZVLS
Want the dynamics? Here's the last 9 Fed dot plots. As you can see, guidance was *low* through 2021. Billions in bonds was sold on this basis. Then the Fed shocked everyone in 2022. Devaluing all the bonds sold. Causing $620B in unrealized losses. Across banks, not just SVB. And… t.co/oHKQsYuoXf t.co/m3FCcQjJ6D t.co/DVMVypKstF
It will all be obvious in hindsight. Fed gave guidance that was off by ~50X.[1] Sold bonds on this basis. Then devalued them massively. Banks couldn't easily sell bonds marked "hold-to-maturity". [2] Couldn't hedge either as many counterparties had been t.co/1XXjSAhc2C… t.co/oal6dz6uAA t.co/n87jryrlC3
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