Few Banks Are Hedging Interest-Rate Risk

Few U.S. banks protected themselves against rising interest rates during the Federal Reserve’s monetary-tightening campaign last year, according to a research paper that says unhedged securities holdings are more widespread than investors might realize.

The paper—“Limited Hedging and Gambling for Resurrection by U.S. Banks During the 2022 Monetary Tightening?”—contends that hundreds of other banks share that risk, which played a role in the collapse last month of Silicon Valley Bank. The paper didn’t single out individual institutions, instead presenting an analysis of aggregate data.