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RBC Bank on Bay Street, Toronto. August 2, 2013.

Gloria Nieto/The Globe and Mail

Just four months ago, Canadians were falling out of love with their beloved bank stocks. By the end of May the S&P/TSX Bank Index was up just 3 per cent on the year, while the S&P 500 had soared 17 per cent.

How times have changed.

Now bank stocks are soaring, with three of the Big Six banks recently hitting all-time highs. They've since slipped a tiny bit, but Royal Bank of Canada, Toronto-Dominion Bank and National Bank of Canada are all in new territory. (The others are faring well, too.)

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Contrast that with the U.S. banks, which went on a tear late last year and early into 2013, but have since levelled off. Suddenly the Big Six don't seem so bad.

Plus, the Canadian banks still pay healthy dividends. Even at these share prices, RBC's dividend yield still amounts to 4 per cent a year, and National Bank's yield is a smidgeon higher at 4.1 per cent. South of the border, JP Morgan Chase's and Wells Fargo's shares yield 2.9 per cent each, while Bank of America's and Citigroup's dividends are practically non-existent at 0.08 per cent.

Canadians love to rub these facts in the faces of people who thought it would be wise to short our banks. Not only have these folks been on the wrong side of the bet, they also have to pay the hefty dividends if they hold their positions. That ain't easy to do.

Investors in Canadian banks have reason to be cheery, but some perspective is required. Yes, a few of the Big Six recently set record quarterly profits, but trading volumes have been incredibly thin, meaning a smaller number of buy orders can amplify the gains.

From the start of June to Aug. 27, the day the first Big Six banks reported earnings last quarter, RBC's trading volumes amounted to roughly 4 million shares a day on the TSX, while TD's averaged 2.7 million shares. Since August 27, those numbers of dropped about 11 per cent for TD, and a whopping 23 per cent for RBC. It makes sense: exchange-wide trading volumes are down again.

The big question now is whether the banks can keep it up. And trust me, I don't think anyone, not even the bank execs themselves, truly know. Many of them braced for a much tougher domestic slowdown, and it never really materialized.

The best we can do, it seems, is look to the U.S. banks, which start reporting on Friday, for some sort of road map. There are widespread fears that the mortgage re-financing market will hit a wall as bond yields soared this past spring, prompting the four biggest banks to slash 10,000 mortgage jobs so far this year.

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There are also big fears about a major drop in fixed-income trading revenues, after some major banks dropped hints of a slowdown on these desks. Citigroup, which brought in revenues of $14.5-billion (U.S.) last year from fixed-income trading is the most exposed.

At least on the trading front, the Canadian banks aren't nearly as exposed. But the recent worries serve as a reminder: don't take this surge for granted.

(Tim Kiladze is a Globe and Mail Reporter.)

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