Do you understand how bonds work? If you buy a bond with a 2% yield with a 5 year maturity and then the yields for similar bonds go to 5%, the value to buy in that market drops at that time. However, if you hold to maturity and it doesn’t default, you still get your 2% yield you bought. Bond funds don’t quite track this because they are constantly buying and selling bonds, which locks in the loss/gain. At any rate, $317B is nothing in an economy that will do $25T this year in GDP.
Yes, I understand how bonds work. My largest holding in the market is the ticker SHY that is made up of US Treasuries that are 1-3 years from maturity. It’s down over 5% :( If I was using margin and living on the edge that 5% drop would have me subject to a Margin Call. That’s because the total sum of these bonds are being marked to market price every day by the market.
This “hold to maturity” gimmick is being used to cover up insolvency by the Federal Reserve and many other institutions. It’s a hope that they won’t have to liquidate these assets to meet any obligations before the maturity date. Yes I’m aware that its a legal gimmick. But that doesn’t change the fact that its an unethical dishonest gimmick built on a foundation of greed and/or denial of reality/responsibilities.
And just a reminder that 317B is over 7x the total “official market net worth” of the entire Federal Reserve System. It’s the equivalent of about $3000 per American family which is about 5x more liquidity that more than half of American families have. Are you by chance a member of Congress? They tend to think that hundreds of billions of dollars is a nothingburger. But for most people it’s actually considered quite a bit of money.
So, I think it would be a good idea if we all just be honest and ethical about what’s happened to the Federal Reserve. Yeah, it’s not joyful to see what’s happened. But it is what it is and the sooner we face this matter honestly the better it’ll be for America in the long run.