So what’s a doom loop?

When bond yields rise, their prices fall, which means a loss for the owners if they mark them to market. For a bank, those losses eat into its capital base, the foundation of its balance sheet. 

In the euro-zone crisis a decade ago, weak government finances, especially in Italy and Greece, led investors to sell their bonds, which local banks also owned in spades. 

Bond prices tumbled and local banks suffered heavy losses, raising the risk they might need to be bailed out. That threatened a further strain on government finances, making their debt more risky, pushing yields higher and feeding back into more losses for banks. It’s a vicious circle that still haunts Europe.

Big banks like JPMorgan Chase & Co. did suffer losses on U.S. government bonds in the first quarter, which led some to slow their stock buybacks, disappointing investors.

Is the doom loop coming to America? The short answer is no, at least not the euro-zone version.

Paul J. Davies Bloomberg 20 april 2022 

https://www.bloomberg.com/opinion/articles/2022-04-20/can-big-u-s-banks-avoid-a-european-style-doom-loop

Europe /Euroland/ Is Heading Toward a New Financial Crisis

Completing the EU’s banking union might be the only way to avoid the dreaded “doom loop.”

https://englundmacro.blogspot.com/2021/04/europe-euroland-is-heading-toward-new.html

Banks avoided debilitating losses in large part because the Fed and the Treasury pledged trillions of dollars to stabilize markets and help borrowers make good on loans. 

Authorities successfully pushed for more capital in the aftermath of the 2008 financial crisis, but never went far enough. 

https://englundmacro.blogspot.com/2021/09/banks-consider-one-crucial-indicator-of.html