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Sep 2019 – May 2023 · Monthly

SVB locked its bond book at 1.79%. Then the cost of money went past it.

The Fed funds rate rises through the fixed yield of SVB's held-to-maturity portfolio in mid-2022; the unrealized loss on those long-dated bonds is what finally had to be recognized in March 2023.

  • Fed funds effective rate
  • 10-year Treasury yield
  • SVB HTM portfolio yield · 1.79%
  • Funding cost above asset yield
  • Chief Risk Officer seat vacant
Fed funds rate and 10-year Treasury yield versus SVB's 1.79% held-to-maturity yield, with the modeled unrealized loss belowTwo stacked panels sharing a monthly timeline from September 2019 to May 2023. The upper panel plots the Fed funds effective rate and the 10-year Treasury yield against a dashed reference line at 1.79%, shading the region where the Fed funds rate exceeds 1.79% from August 2022 on. The lower panel plots a duration-based estimate of the unrealized loss on SVB's held-to-maturity portfolio, rising from about $2 billion in January 2021 to $17 billion by March 2023. A table view with every value is available below the chart.CRO seat vacantApr–Dec 2022Policy rate vs. the yield SVB locked in0%1%2%3%4%5%HTM book built here · 10-yr yield 0.6–1.6%SVB HTM yield 1.79%fixed · avg. duration 6.2 yrsFunding cost abovewhat the bonds earn5.06%3.57%What the duration mismatch costModeled unrealized loss on the $91.3B HTM portfolio, $ billions$0B$10B$20B$15.2B reported10-K · Dec 31, 2022$17.2B20202021202220231234
  1. 1 · SVB unwinds ~$10B of interest-rate hedges as yields sit near lows
  2. 2 · Fed begins hiking; the CRO seat goes empty the following month
  3. 3 · Fed funds rate rises above 1.79%: the book now costs more to fund than it earns
  4. 4 · $21B AFS sale turns a $1.8B paper loss into a real one; the run follows within 48 hours

Sources: FRED series FEDFUNDS and GS10 (Board of Governors); SVB Financial Group 10-K FY2022 and 8-K of Mar 8, 2023. Loss panel is a duration-based estimate (fair value ≈ $91.3B × (1 − 6.2 × Δ10-yr yield from a 0.70% purchase-era baseline)), not reported data.