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Banks tower above pedestrians in Toronto’s financial district.Kevin Van Paassen

Even though TSX financial stocks have risen nearly 10 per cent year-to-date, corporate insiders are signalling there could be more gains to come.

INK Research, which monitors buying and selling activity by executives and directors within their own businesses, said today that its financials indicator is at 178 per cent. At that level, there are almost two stocks with key insider buying for every one with selling. A reading of 100 per cent suggests there are an equal number of stocks with buying as there are selling.

The indicator has largely held steady over the past three months after peaking at 353 per cent in July. While such behaviour often suggests a market peak, INK Research analyst Ted Dixon doesn't think that's necessarily the case this time around.

"Given that the indicator is at such a high level, insiders seem to be suggesting that even if there is a pullback in the financials, stocks are unlikely to test the spring lows," he said in a research note. "Insiders are resisting the urge to take large profits."

The actions by corporate insiders may suggest there's some optimism in the industry that bond yields are finally going to start rising in the near future, a positive for banks and especially insurance companies. The puny interest rates of late make it difficult for insurers to generate income on the large amount of cash they need to hold in reserves.

"While it is too early to suggest that bond yields are about to climb in the context of rising equity markets, insiders in the financials sector are leaning their bets on the bullish side. Their positive outlook persists despite the risks we hear about every day such as U.S. budget problems," said Mr. Dixon. "On balance, smart money in the financial sector is signalling there remains opportunity to profit from the odd mix of central bank easy money, muted consumer price inflation, and high dividend yields all baked into an economy with modest economic growth."

Over the past 60 days, the financial firm with the most insider buying, on a value basis, has been AGF Management. It saw a net $1,150,970 in buying, and ranks sixth over all among TSX stocks with the most insider purchases, according to INK Research.