Realizing Those Unrealized Bond Losses. ?Daydreams vs. Nightmares.

We've written about the $1.1 trillion unrealized losses on the Fed's balance sheet. However, their footnotes say that's not a problem since the bonds are designated "Held to Maturity".

That footnote is only correct until it isn't.??

Banks, too, have this problem in their bond portfolios. Traditional asset and liability matching techniques mitigate the issue. Unfortunately, the lure of the carry trade in a zero interest environment was too much for some banks to resist.

Today, Silicon Valley paid the price.?It reportedly needed to sell bond holdings at a loss to fund deposit withdrawals.?Its stock fell 60% today.?

We will lie awake tonight wondering how this might impact other large banks.? Of course, that's better than falling asleep and having nightmares about how this might impact the Fed's multi-trillion dollar portfolio.