Goldman Sachs bought the SVB bonds whose $1.8 billion loss set off the startup lender’s meltdown

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Silicon Valley Bank revealed that Goldman Sachs purchased the bond portfolio on which the startup lender recorded a multibillion-dollar loss, precipitating the largest bank failure since 2008.

According to Reuters, the debt holdings were originally valued at $23.97 billion but were eventually sold for a negotiated price of $21.45 billion. Silicon Valley Bank suffered a $1.8 billion loss as a result (SVB).

The massive shortfall prompted the bank to try to raise more capital by selling shares, a plan that backfired and sparked an old-fashioned bank run, leading to the bank’s rapid meltdown.

The lender was shut down by regulators on Friday and taken over by the Financial Deposit Insurance Corporation, marking the largest bank failure since Washington Mutual went bankrupt 15 years ago. Signature Bank followed suit not long after.

The losses from SVB’s bond fire sale were primarily caused by the Federal Reserve’s aggressive monetary policy over the last year. SVB’s bond holdings have lost value as interest rates have risen by 450 basis points since March 2022, despite the fact that the lender purchased the assets when rates were relatively low. Bond prices fall as interest rates rise.

The company’s $21 billion bond portfolio had a yield of 1.79% and a duration of 3.6 years, according to SVB Financial’s updated investor deck. The 3-year US Treasury note now yields 4%, a significant increase from the levels at which the bank purchased the securities prior to 2022.

Disclaimer

We strive to uphold the highest ethical standards in all of our reporting and coverage. We StartupNews.fyi want to be transparent with our readers about any potential conflicts of interest that may arise in our work. It’s possible that some of the investors we feature may have connections to other businesses, including competitors or companies we write about. However, we want to assure our readers that this will not have any impact on the integrity or impartiality of our reporting. We are committed to delivering accurate, unbiased news and information to our audience, and we will continue to uphold our ethics and principles in all of our work. Thank you for your trust and support.

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Goldman Sachs bought the SVB bonds whose $1.8 billion loss set off the startup lender’s meltdown

Silicon Valley Bank revealed that Goldman Sachs purchased the bond portfolio on which the startup lender recorded a multibillion-dollar loss, precipitating the largest bank failure since 2008.

According to Reuters, the debt holdings were originally valued at $23.97 billion but were eventually sold for a negotiated price of $21.45 billion. Silicon Valley Bank suffered a $1.8 billion loss as a result (SVB).

The massive shortfall prompted the bank to try to raise more capital by selling shares, a plan that backfired and sparked an old-fashioned bank run, leading to the bank’s rapid meltdown.

The lender was shut down by regulators on Friday and taken over by the Financial Deposit Insurance Corporation, marking the largest bank failure since Washington Mutual went bankrupt 15 years ago. Signature Bank followed suit not long after.

The losses from SVB’s bond fire sale were primarily caused by the Federal Reserve’s aggressive monetary policy over the last year. SVB’s bond holdings have lost value as interest rates have risen by 450 basis points since March 2022, despite the fact that the lender purchased the assets when rates were relatively low. Bond prices fall as interest rates rise.

The company’s $21 billion bond portfolio had a yield of 1.79% and a duration of 3.6 years, according to SVB Financial’s updated investor deck. The 3-year US Treasury note now yields 4%, a significant increase from the levels at which the bank purchased the securities prior to 2022.

Disclaimer

We strive to uphold the highest ethical standards in all of our reporting and coverage. We StartupNews.fyi want to be transparent with our readers about any potential conflicts of interest that may arise in our work. It’s possible that some of the investors we feature may have connections to other businesses, including competitors or companies we write about. However, we want to assure our readers that this will not have any impact on the integrity or impartiality of our reporting. We are committed to delivering accurate, unbiased news and information to our audience, and we will continue to uphold our ethics and principles in all of our work. Thank you for your trust and support.

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