SVB’s Demise Shows UK Pension Funds Weren't the Only Cockroach

It’s the unknown unknowns which rattle confidence the most, because there’s never only one cockroach. Following a year of significant central bank interest-rate hikes, the collapse of Silicon Valley Bank has aroused concern that higher bond yields and lower prices may not have been acknowledged or hedged sufficiently across the less visible private sectors of the economy and the banks that cater to them. It’s quite amazing that with short-maturity US yields having soared in a straight line to 5% from zero we haven’t had more incidents of naked bathing — but with the tide still a long way from shore, more unclothed swimmers may still be revealed.

There was an early warning siren six months ago in the UK about how unexpected aftershocks might suddenly be triggered by the major repricing of fixed income globally. But the resolution of that crisis offers a reassuring example of how this latest systemic wake-up call might be worked through.