The search for Silicon Valley Bank-style portfolios

The demise of Silicon Valley Bank had many causes. But at its heart was the institution’s bond portfolio, which plummeted in value as interest rates rose. Little surprise, then, that analysts and investors are scrambling to locate similar hoards elsewhere. One disconcerting finding lies in Japan. Investment institutions there have accumulated vast stocks of domestic and foreign long-maturity bonds.These bond holdings have already slumped in value, thanks to a combination of sales and the revaluation that occurs when rates rise—the potential for which is known as “duration risk”. Long-term foreign-bond holdings by “other financial corporations”, a category which includes insurance firms, investment outfits and pension funds, ran to $1.5trn in June, the most recent figure available, some $293bn below their level at the end of 2021.