Silicon Valley Bank imploded in a single day. It could be just the tip of the iceberg.• Business Insider
Case in point: Silicon Valley Bank imploded in a single day after surging interest rates caused it to sell a bond portfolio at a huge loss.
The situation is an example of how low-interest-rate risk-taking can backfire as financial conditions tighten.
The market on Friday watched as regulators shut the doors at Silicon Valley Bank, capping off a speedy decline and marking the biggest bank failure since 2008.
The bank's collapse was a byproduct of the Federal Reserve's hiking of interest rates by 1,700% in less than a year. Once risk-free Treasurys started generating more attractive returns than what SVB was offering, people started withdrawing their money, and the bank needed a quick way to pay them. They were ultimately forced to sell their loan portfolio at a huge loss.