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Why U.S. bank stocks are getting cheaper Add to ...

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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.

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