This is what precisely happened to Siliicon Valley Bank in the US - the second largest bank to fail. (The first is Lehman Brothers. SVB has assets of $300B +
The bank is awash from liquidity of start ups who got initial fresh funding from Venture Capitaists, and or are starting to bet positive cash flows from their ventures
However since there were no borrowers yet, SVB was forced to invest in long term bonds (or some equities but which were wrecked by interest rate hikes) Since the bond prices are inversely related to interest rates, their market value declined They lost over $1B last year due to negative yields. Their stock prices dropped, triggering a run.
Will morer be coming?
