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Many risk managers try to prepare for things going wrong. Google tackled the problem of protecting itself if things go right—if the global economy turns around and interest rates head higher. The company had invested in agency mortgage-backed securities (MBS) because of the relatively attractive yields (1.5%-2%) and if rates rise, it was looking at a potentially large drop in the value of those investments. 

“When the Fed raised the overnight borrowing rate from 3% to 5.5% in 1994,” notes Hui-Chien Chang, director of the portfolio management group, “the Barclays’ U.S. aggregate bond index had a dismal return of -2.94%.” That was not the kind of loss Google could accept.

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