This Is Why Banks Might Start to Worry

After 2023’s bank failures, many Americans began to panic. They had assumed that their money held in banks was safe, and bank failures that seemingly appeared out of nowhere were a deep shock.

Although the Federal Reserve and other federal agencies worked to stabilize the banking system in the aftermath of those failures, one of the key reasons behind those failures remains problematic: unrealized bond losses.

Unrealized bond losses are just that, unrealized losses. They’re losses on paper but, as long as banks don’t have to sell those assets, they’re not losing money.

It’s only if banks have to sell those bonds that they end up losing money. Hopefully they won’t have to, but that isn’t always guaranteed.

And because those unrealized bond losses remain a problem for bank balance sheets despite recent interest rate cuts, many people are starting to worry.

How Bonds Work

The problem with bonds is that, like any other financial asset, they can lose value. In the case of bonds, the value of the bond is inversely correlated to its yield.

That means that when bond yields rise, bond prices fall. And when bond yields fall, bond prices rise.

If you’ll recall, the Federal Reserve began hiking its federal funds rate in March 2022. From that point on, bond yields began to rise, and bond prices began to fall.

2022 was a bad year for bonds as a result, with numerous bond funds losing value. But again, unless you had to sell bonds, any losses were only on paper.

When the Fed began to cut the federal funds rate in September 2024, many hoped that would mean that bond yields would start to fall, and bond prices would start to rise.

But while yields on short-term bonds fell along with the Fed’s rate cuts, rates on longer-dated Treasury bonds actually rose. The yield on the 10-year Treasury rose from 3.65% on September 17, 2024 to 4.45% on February 6, 2025, while the yield on the 30-year Treasury rose from 3.96% to 4.65% during the same period.

That means that those who owned bonds or bond funds that held those longer-dated bonds would have seen their holdings lose value. But again, those are still just paper losses until they have to sell.

Despite the federal funds rate being cut by the Fed, banks and other holders of bonds haven’t yet seen any benefits of lower interest rates, because the market interest rates of much of their bond holdings haven’t decreased, and the value of their bond holdings has lost value.

Bonds and Bank Failures

This was one of the reasons behind the failure of Silicon Valley Bank in 2023. The bank had significant interest rate risk as a result of its bond holdings, and significant unrealized losses.

As news of those losses spread, depositors began to withdraw money and the bank had to sell bonds to get cash to pay them. Bonds that the bank had previously expected to hold to maturity instead had to be sold, and their value had to be marked to market, locking in those losses.

Even after the bank failures of 2023, banks retained significant amounts of bonds with unrealized losses on their balance sheets. There’s even a project at The Banking Initiative at Florida Atlantic University that tracks banks and their exposure to these unrealized losses.

Again, unrealized losses aren’t a problem as long as the economy is operating fine and banks don’t have to sell their bond holdings. But if the economy starts to weaken, or if people start to lose faith in their bank and banks have to start selling bonds, these unrealized losses may eventually become realized losses.

So far there has only been one bank failure in 2025, although it was a case of suspected fraud and may not have had anything to do with unrealized losses. But that bank failure brought to the fore once again the realization that bank failures remain an ongoing concern.

We may all feel that our money in the bank is safe right now, but how long will it remain safe? After the Fed paused on cutting interest rates further at its last FOMC meeting, which way will interest rates move?

Will the Fed be able to put further downward pressure on interest rates, relieving banks of the threat of unrealized bond losses? Or has the Fed lost the ability to impact rates, leaving banks subject to the whims of financial markets?

Helping To Safeguard Your Savings

When 2023’s bank failures erupted, many people began moving their money out of banks and into perceived safe havens such as money market funds. And with those bank failures having happened two years ago, it is possible that most people have forgotten about the threat of bank failures.

But what would happen if banks were to start failing like they did in 2023? Are you one of the people who already took steps to try to help safeguard your savings in the aftermath of those banking failures?

Many people in 2023 also started to safeguard their savings with precious metals like silver and gold. Gold demand has remained strong since then, with gold recently hitting new all-time high prices.

Gold is one of many safe haven assets people turn to when financial uncertainty threatens. And with more and more Americans expressing concern about their financial well-being, it’s no surprise that so many people are turning to gold.

If you’re looking at events happening throughout the economy and worried about your financial future, maybe it’s worth taking a look at how gold and silver might be able to help.

Both gold and silver often function as countercyclical assets, performing well when financial markets aren’t. Gold, for instance, rose nearly 25% during the same time period that markets fell over 50% from October 2007 to March 2009.

Goldco has helped thousands of customers buy gold and silver over the years, and with over $3 billion in precious metals placements and over 6,000 5-star reviews we have worked hard to make ourselves one of the best gold companies in the country.

Don’t let yourself get caught unaware like so many people did after 2023’s bank failures. Call Goldco today to learn more about how you could benefit from owning gold and silver.