The assets are impaired at today's interest rates. The yield curve is very inverted (is that gramatically correct??) this signals interest rates will be quite a lot lower in a few years. At that time the assets will not be impaired - they may even be at above-par value.
It doesn't matter that prices might recover in the future. I'd argue they might not -- and if anyone believed otherwise they would buy up the assets at inflated prices (why arent they?!) SVN rolled the dice, made bets, the value is way down and...they didnt have enough money to allow customers to withdraw money. That is a fail. They needed to raise a lot of cash, they didnt/couldnt raise enough. That is a fail.
Further, they underwrote tons of LoCs for startups which are underwater due to down-rounds. That isnt a temporary impairment, that is a permanent impairment.
Their customers are burning funds (as most VC-funded companies do) and VC funding is down, so declining balances via continued withdrawal is the natural state they need to support (even in the absence of a bank run.)
These assets will all be redeemable for par value when they mature. The only impairment they have is that they pay less interest in the interim than other available bonds, because their rates were locked in before the interest rate spike.
>> These assets will all be redeemable for par value when they mature.
This is absolutely false -- there is no guarantee of this. Agency securities pay more than treasuries because there is a risk of default (never in aggregate, but pass-thru component cashflows i.e. individual homes.) Further, there is a risk that upon default, the home isn't of sufficient value to account for the lost principal. If anyone has doubts of the potential for default of agency securities, the mortgages underneath these bonds are all publicly displayed monthly: https://singlefamily.fanniemae.com/applications-technology/f... and you can see defaults also.
>> The only impairment they have is that they pay less interest in the interim than other available bonds, because their rates were locked in before the interest rate spike.
This is a third of the story.
Second third of the story: they may less interest than advertised due to defaults/delinquencies
Third third of the story -- and most important: their value has gone down, so in the immediate term, the bank depositor cannot withdraw money (because the bond cant be sold at book value.) It is absolutely not OK to tell bank depositors to wait 10yrs while a bond bays them back little by little. Bank depositors should be able to withdraw money at any point they want.
