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Tourists walk past a Bank of America banking centre in New York in this June 22, 2012 file photo. The U.S. government on August 6, 2013, filed two civil lawsuits against Bank of America for what the Justice Department and securities regulators said was a fraud on investors involving $850-million (U.S.) of residential mortgage-backed securities.
Tourists walk past a Bank of America banking centre in New York in this June 22, 2012 file photo. The U.S. government on August 6, 2013, filed two civil lawsuits against Bank of America for what the Justice Department and securities regulators said was a fraud on investors involving $850-million (U.S.) of residential mortgage-backed securities.
(Brendan McDermid/Reuters)

Why U.S. bank stocks are getting cheaper

There’s no mystery behind the recent weakness in the U.S. bank sector: stock prices continue to track the steepness of the U.S. yield curve.

U.S. banks were among the few sectors hoping that the Fed would withdraw monetary stimulus. The threat of tapering pushed ten-year Treasury bond yields sharply higher and made the yield curve steeper. Since banks specialize in borrowing at short-term rates and lending the proceeds at long-term rates, the steeper curve signalled higher profits, and bank stocks climbed.