Macaskill on markets: SVB – Is hedging only good for Wall Street?
Interest rate risk management has been complicated by the fall in yields after the US bailout of SVB’s depositors. Clients may feel that hedging chiefly benefits Wall Street dealers rather than themselves.
Goldman Sachs pulled off one part of a planned rescue of Silicon Valley Bank (SVB). Unfortunately, the sale of a portfolio of securities with a book value of almost $24 billion by SVB to the firm on March 8 for $21.45 billion did not accompany a successful equity fundraising and help to shore up confidence in the technology-focused lender.
SVB instead failed within a couple of days, as a bank run prompted its receivership and a US government bailout of its uninsured depositors.
Goldman was at least able to deploy its silver linings trading playbook by turning a quick dealing profit on the purchase of bonds from SVB, which was a cheering result in an otherwise distressing episode for global financial markets.