US Banks Face $140B Losses on Debt Securities, Unrealized Losses Reach $558.4B in Q2 2023

US banks have experienced significant losses on their debt securities, with a value decrease of $140 billion in the last quarter. Cumulative unrealized losses have reached $558.4 billion in Q2, surpassing the previous peak of $689.9 billion in Q3 2022. The most opaque part of US banks' bond portfolios has seen paper losses of nearly $400 billion, an all-time high and 10% above the peak at the beginning of the year, which led to the collapse of Silicon Valley Bank. In Q2 2023, US banks had nearly $600 billion in unrealized losses on their securities portfolio, equivalent to almost 25% of the banking system's capital base. The surge in interest rates has likely worsened these unrealized losses on bonds and loans held by US banks in the third quarter, putting further strain on their balance sheets. As interest rates rise and remain higher for longer, it is expected that unrealized losses on investment securities for banks will increase by another $100-200 billion in the current quarter.