Just as the industry saw unrealized losses in securities portfolios stabilize last year, the fourth quarter changed all that, putting renewed pressure on banks in the year ahead and raising fresh concerns about valuations, mergers and whether institutions will be forced to sell securities at a loss.
Bond yields have been on a bumpy ride. As bond yields rise, bond values fall, sometimes leaving banks with unrealized losses on the balance sheet from previously purchased bonds.
Unrealized losses on securities increased by 32.5% from the third quarter and 1% from a year earlier, to $482.4 billion on Dec. 31, according to data recently reported by the Federal Deposit Insurance Corp. The agency noted that longer-term interest rates, in particular the 30-year mortgage and10-year Treasury rates, increased significantly during the quarter, decreasing the value of securities on banks' books.
