Silicon Valley Bank’s roughly $7 billion municipal bond portfolio could pose a challenge for BlackRock Inc. as it starts liquidating the failed bank’s securities, investors say, Bloomberg News reported. The lender’s muni holdings were mostly long-dated bonds with low coupons, according to Nicholos Venditti, senior portfolio manager at Allspring Global Investments LLC, who said he saw the breakdown in a list circulated by dealers. The bonds fit solidly into a category of debt that got hammered by rising interest rates, the very phenomenon that ultimately helped spur the turmoil in the banking industry. Munis due in 22 years or longer lost 15.6% last year, almost double the decline of the broader market, data compiled by Bloomberg show. Such bonds are still deep underwater, triggering a tax provision for munis known as the de minimis rule. The measure requires investors to pay higher taxes on debt sold at hefty discounts, should it then appreciate. It’s a backdrop that’s making some money managers still recovering from last year’s pain even more reluctant to dive in. Read more.
The Senate Banking Committee will hold a hearing tomorrow at 10 a.m. ET titled, “Holding Executives Accountable After Recent Bank Failures.” Click here for more information.
