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But they didn’t have to buy THOSE bonds. They bought the wrong bonds.

Did they know they were buying the wrong bonds?

Of course, they are bankers, bonds are their daily business.

I think maybe they are not very good at running a bank.

They chose to buy the much riskier bonds to support their very high 4.5% savings yield.

they were offering 4.5%? that explains a lot in terms of their reaching for yield in low quality assets

if they bought short term bills they wouldn't have lost value like the 10 yrs did. So, they made a duration mistake.

No, they were not legally required to buy 10 year treasuries