It sounds like they were buying bonds to prevent the market from functioning and increasing the interest rate from 0% (or near enough), to give the government “free” money to spend.
Now with higher interest rates they have a big capital loss if the bonds are priced normally.
I don’t know what the real effect is. I guess that if they just don’t sell the bonds and wait to get paid then it will net out for the bank, but since the government is the borrower they’ll probably try to pay off the principal with new bonds and will have to raise a lot more than the value of the original bonds, so the loss will be transferred from the bank to the government debt anyway.
They have to keep raising interest rates to try to keep up with the Fed. If they continued to print money to suppress interest rates then their currency would collapse even faster (it’s already down 40% over the last decade and over 10% in the last year).
Thanks - interest rates do explain it.
I was thinking that the Central Bank would hold everything to maturity, which does not make sense.