Further Fed Tightening Will Be “Deadly” For Banking System, Says Godfather of Interest Rate Hedging
For 40% off an annual subscription to Macro Hive Prime (220 / year instead of 374 / year), go to https://macrohive.com/jack or use discount code JACK at checkout.Macro Hive sample report on Silicon Valley Bank (co-written by Mustafa Chowdury): https://macrohive.com/hive-exclusives/silicon-valley-bank-how-the-government-plans-to-contain-the-fallout/
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Just how bad was the risk management at Silicon Valley Bank (“SVB”) when it came to the threat of rising rates? And now that rates have exploded higher over the past year, is this interest rate risk limited to only a few banks, or are these risks spread throughout the entire U.S. banking system?
Jack’s today is uniquely qualified to answer these questions. Mustafa Chowdury, chief rates strategist at Macro Hive, practically invented the field of interest rate risk management, and two decades ago he was successfully managing interest rate risk on Freddie Mac’s giant portfolio of mortgages worth hundreds of billions of dollars (several times that of Silicon Valley Bank). Chowdury argues that, contrary to claims otherwise, the U.S. banking system was not sufficiently hedged for last year’s rapid rise in interest rates.
Filmed on March 16, 2023.
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Timestamps:
00:00 Intro
01:33 Mustafa Chowdury's Background
4:39 "That's The Mortgage Game"
11:27 Collapse of Silicon Valley Bank: Interest Rate Risk Lurking At The Scene Of The Crime
21:14 How To Properly Hedge Interest Rate Risk Properly
27:37 Chowdury Pioneered Use Of Swaption In 1990s
29:36 Silicon Valley Bank (SVB): Who To Blame?
33:20 Accounting Treatment (Available For Sale Vs. Held-To-Maturity)
41:47 The Fed's Convexity Quantitative Easing (QE) Continues
50:35 Bank Profitability With Higher Deposit Costs
01:03:50 Interest Rate Risk Is Spread Throughout The U.S. Banking System
01:11:52 "There Will Be Fewer Bank Runs" Because Of FDIC Relief
01:19:29 Will Fed Cut In 2023?
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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets. Receive SMS online on sms24.me
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