Silicon Valley Bank invested billions of dollars in super safe U.S. government bonds. But that choice exposed to the bank to a whole other set of risks.
The banking sector has been hammered by the failure of Silicon Valley Bank. But the bank had money stashed into what's supposed to be the safest asset around. What happened?TIMOTHY A. CLARY/AFP via Getty Images
"Silicon Valley Bank was just flush," he says."Its deposit base tripled between 2020 and 2022, with billions and billions of dollars flowing in." At the end of that time, the government will pay you back for that loan, plus a little interest. US bonds are considered to be the safest investment on the planet. The U.S. always pays back its debts. They are often called a riskless asset.
"Basically what happened was Silicon Valley Bank wanted a bigger payout," says Alexis Leondis, who writes about bonds for Bloomberg."So they basically wanted to reach for longer term bonds, because, I think, they felt like what they would get from shorter term bonds was kind of a joke."Silicon Valley Bank locked billions of dollars away into 10 year bonds. But there were risks it wasn't seeing.Those billions were now locked up for years.
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