What we've seen so far in problems with the banks is those that purchased long term bonds that went down in value as interest rates went up.
Some mainstream economist crunched the figures and came up with a $620 billion dollar hit to the banks balance sheets if these were marked to market. That is if they needed to be sold.
We haven't even gotten to the fun part yet. That's when borrowers start to not pay back their loans because they ran out of money they could borrow on their credit lines. Credit spreads are widening especially for junk bonds. They are now over a 5% spread to treasuries. That means companies are borrowing at about a rate of 8-9%. Companies trying to roll-over their outstanding debt are gonna find that they just can't pencil in anything except for losses at these new rates. Credit is simply going to dry up for a large swath of corporations.
There's also about $6 trillion corporate debt just one step above junk. Everyone knows it's a systemic risk with the corporations just playing games with the ratings agencies (once the downgrades happen it will be quite quick).
Some mainstream economist crunched the figures and came up with a $620 billion dollar hit to the banks balance sheets if these were marked to market. That is if they needed to be sold.
We haven't even gotten to the fun part yet. That's when borrowers start to not pay back their loans because they ran out of money they could borrow on their credit lines. Credit spreads are widening especially for junk bonds. They are now over a 5% spread to treasuries. That means companies are borrowing at about a rate of 8-9%. Companies trying to roll-over their outstanding debt are gonna find that they just can't pencil in anything except for losses at these new rates. Credit is simply going to dry up for a large swath of corporations.
Good luck to all with your investments.
https://www.axios.com/2023/03/21/high-yield-bond-spreads-show-increasing-recession-jitters