Most U.S. banks are technically near insolvency, and hundreds are already fully insolvent

Most U.S. banks are technically near insolvency, and hundreds are already fully insolvent

By Nouriel Roubini, Professor Emeritus of Economics at New York University’s Stern School of Business, Chief Economist at Atlas Capital Team, CEO of Roubini Macro Associates, Co-Founder of TheBoomBust.com, and the author of MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them

Duration risk hammered Silicon Valley Bank and seems to have been lost on many bankers, fixed-income investors and bank regulators.

In January 2022, when yields on U.S. 10-year Treasury bonds TMUBMUSD10Y, 3.556% were still roughly 1% and those on German Bunds were -0.5%, I warned that inflation would be bad for both stocks and bonds.

Higher inflation would lead to higher bond yields, which in turn would hurt stocks as the discount factor for dividends rose. But, at the same time, higher yields on “safe” bonds would imply a fall in their price, too, owing to the inverse relationship between yields and bond prices.

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