Historical Stress Tests
Replay real rate shocks on today's portfolio: the 1994 bond massacre, the 2008 crisis, the 2013 taper tantrum, March 2020, the 2022 rate shock and the 2023 regional-bank stress, or a scenario of your own, with losses by scenario and position and a comparison with VaR.
Learning focus: tail events far exceed VaR, and the duration lessons of SVB in 2023.
Templates use sample prices set from illustrative yields. Semiannual coupons, ACT/ACT. Edit any cell.
Curve moves are the change in the US Treasury par curve between the two dates. Credit moves are approximate changes in investment-grade spreads, rounded and editable; they apply only to credit positions.
Ticked positions take the credit spread move as well as the Treasury move. Guessed from the name; change any.
| Scenario | 10Y move | Credit | From rates | From credit | Total | % of value |
|---|---|---|---|---|---|---|
| 1994 bond massacre | 224 bp | 0 bp | −1,287,808 | 0 | −1,287,808 | −13.3% |
| 2008 financial crisis | −154 bp | 290 bp | 1,016,407 | −500,006 | 516,401 | 5.3% |
| 2013 taper tantrum | 132 bp | 15 bp | −720,607 | −23,561 | −744,168 | −7.7% |
| March 2020 | −70 bp | 270 bp | 483,526 | −446,686 | 36,840 | 0.4% |
| 2022 rate shock | 273 bp | 65 bp | −1,574,160 | −91,214 | −1,665,374 | −17.2% |
| 2023 regional-bank stress | −59 bp | 30 bp | 402,264 | −53,189 | 349,075 | 3.6% |
Instantaneous shocks to today's portfolio, repriced in full. Click a row to see its curve move.
The fastest hiking cycle in forty years. Yields rose 250–400bp across the curve in ten months: the worst year for bonds in modern history.
| Position | 1994 | 2008 | 2013 | 2020 | 2022 | 2023 |
|---|---|---|---|---|---|---|
| 3Y Treasury | −146.2K | 82.7K | −36.4K | 55.3K | −183.7K | 57.5K |
| 5Y Corporate A | −207K | −106.9K | −112.5K | −146.8K | −294.5K | 52.6K |
| 7Y Corporate BBB | −187.1K | −103.2K | −122.3K | −153K | −263.6K | 37.6K |
| 10Y Treasury | −459.5K | 377.9K | −282.5K | 164.9K | −547.7K | 138.2K |
| 20Y Treasury | −288K | 265.8K | −190.5K | 116.5K | −375.8K | 63.2K |
This portfolio has a modified duration of 6.5 and a DV01 of 6,282: the 2022 move takes 17.2% off its value. Silicon Valley Bank had put deposits that had poured in during 2020–21 into long Treasuries and mortgage bonds at very low yields. By the end of 2022 its held-to-maturity securities showed about $15 billion of unrealized losses against about $16 billion of equity. Accounting kept those losses off its income statement, but not out of reach: on 8 March 2023 it sold $21 billion of securities at a $1.8 billion loss to raise cash, the announcement set off a run on deposits, and it failed two days later. Duration risk doesn't disappear because a bond is labelled held to maturity.