May 20, 2025 ☼ Zettelkasten ☼ Automated Post
Screenshot of Rising stock prices “won’t fix this”: U.S. banks are sitting on $500B worth of unrealized losses | Investorsobserver
U.S. banks are in jeopardy as data from the Federal Deposit Insurance Corporation (FDIC) displays unrealized losses climbing to $482.4 billion in Q4 2024. This is a substantial increase of 32.5% from the previous quarter. Apollo Asset Management’s chief economist, Torsten Slok warns of a threat if the U.S. economy experiences stagflation - a combination of rising prices, rising unemployment, and slowed growth. This could result in higher rates for longer and increased credit losses. Former Federal Reserve staffer Rebel Cole is adamant that despite these losses not yet appearing on income statements unless the investments are sold, one bad news story could trigger a banking crisis.
The recent surge in yields has been attributed to the Trump administration’s proposed tax cuts, which are expected to increase the deficit. This has resulted in investors demanding higher yields, otherwise known as bond vigilantes. According to Deutsche Bank, the last time yield levels reached this point, Trump officials had to moderate their trade-war stance to prevent further market fallout. Stanford finance professor Amit Seru has stated that banks start facing serious problems when the 10-year treasury yield surpasses 4.5%. This sentiment was echoed in a report from Investor’s Observer, identifying that a yield of 5% on the 10-year might force a shift in the Trump Administration’s economic messaging to reassura bond investors.#USBankingCrisis #UnrealizedLosses #StagflationRisk #BondVigilantes #EconomicMessagingShift