Reply To: Increase in the Interest rates will lead to massive bank failures?

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#17482
jmherbener
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Rising interest rates will collapse the capital value (i.e., the market price) of assets banks hold. If they have existing T-bonds at 3% and interest rates on newly issue T-bonds rise to 6%, the price investors will be willing to pay for the 3% bonds collapses. When that happens, banks become insolvent.