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As we dawned 2022, yield on ten year treasuries was 1.73%. Also referred to as T-bills - the rate today is 3.4%. Last week the rate eclipsed 4% for the first time since last October. But prior to that, rates had stubbornly refused to budge north of 4%. During the Federal Reserve’s loosening in the pandemic - rates on ten year treasuries were below single digits. That’s right! In mid 2020, if you agreed to tie up your money for ten years - until maturity - you’d receive a paltry .52%. Let’s say you were quite cautious, risk averse, but wanted some return on your cash and bought a pile of these government issues. If you planned to redeem the bonds in 2030 - no problem. The return would be there, along with your principal amount. Let’s say for example you parked $100,000 in this manner. You could expect your investment to yield $520 per year for its duration. But. What would happen if you needed the principal before the maturity date of 2030? You could sell the bonds on the market. But at a steep discount. How much, you may be wondering? Using the yield of 3.4% today, your principal would be worth $15,294! That’s a hit of close to 85%. This very over simplified example is partially what caused Silicon Valley Bank to fail and be seized by federal regulators. When the run on deposits occurred last week - the bank was forced to take a loss on its bond portfolio in order to cash out investors. Bonds move inversely. As the price of a bond increases its yield decreases and vice versa. Capitalization rates on real estate behave in a similar fashion. As cap rates increase - the value of the underlying property decreases.