Banks’ pandemic-era bond investments are still hampering some lenders, dragging down the profitability of those that are saddled with low-yielding portfolios for months or even years to come. The concerns are far less severe than they were in March and April, when the failure of Silicon Valley Bank brought scrutiny of surviving banks whose large bond portfolios were also underwater. The question now is less about whether more banks are at risk of failing — and more about how much their profitability will be squeezed. The pressures aren’t universal since some banks held off on putting much cash into bonds during the pandemic, or chose shorter-term options that freed up their money more quickly. But those that did buy longer-term bonds before interest rates started rising in 2022 are facing more pain.
Source: The Bond Buyer