“reasonably expected” works 99% of the time and then completely implodes 1% of the time.
It’s like building a seawall to protect against the next tsunami, and measuring the height of the seawall based on the worst past tsunami. But the worst past tsunami was completely unpredictable prior to it happening, based on all the lesser tsunamis that had come before it. And the future worst tsunami will be by definition worse than the past worst tsunami and similarly unpredictable based on all the lesser past ones.
Interest rates being near 0% would create the most easily predictable risk of a calamity from investing in long-term bonds. Where else do interest rates go? Going negative is not likely to happen for long.
Furthermore, the bond yield was inverted for quite some time (indicating a financial tsunami was on the way) making it even more idiotic to be in long-term treasuries.
Also, building walls against physical forces is a terrible analogy for pressing a button to change your bond ladder risk.
Did you forget? There is a reason that all depositors would want their money in 24 hours … they realized that the bank was mismanaged and overly exposed to the interest rate risk, and they were only insured for $250k.
