Long-term U.S. Treasury yields have been rising pretty quickly lately and haven’t come back down. Are bank stocks starting to buckle?
Yesterday, the U.S. 10-year Treasury yield briefly surged to 5.36%, while the 30-year yield hit a 24-year high.
Singapore bank stocks, which had been holding steady, suddenly plunged across the board over the past two days:
At 10 a.m. today, DBS was down 3.2%, UOB 4.8%, and OCBC 4.2%. By around 2:30 p.m., DBS’s loss had widened to 4.84%.
Hong Kong-listed HSBC was also down more than 4% today. European bank stocks fell about 3.5% yesterday, with Deutsche Bank, Société Générale, and others each dropping more than 4%.
Higher interest rates can boost banks’ net interest margins. But if long-term rates rise too quickly, the bonds held by banks come under pressure, while funding costs and the risk of potential bad loans also increase. Until now, people have focused on the benefits of high interest rates for banks. They may now be starting to worry about the other side of the story.
If U.S. Treasury yields stay elevated, this bank-stock correction may not be over yet.
Yesterday, the U.S. 10-year Treasury yield briefly surged to 5.36%, while the 30-year yield hit a 24-year high.
Singapore bank stocks, which had been holding steady, suddenly plunged across the board over the past two days:
At 10 a.m. today, DBS was down 3.2%, UOB 4.8%, and OCBC 4.2%. By around 2:30 p.m., DBS’s loss had widened to 4.84%.
Hong Kong-listed HSBC was also down more than 4% today. European bank stocks fell about 3.5% yesterday, with Deutsche Bank, Société Générale, and others each dropping more than 4%.
Higher interest rates can boost banks’ net interest margins. But if long-term rates rise too quickly, the bonds held by banks come under pressure, while funding costs and the risk of potential bad loans also increase. Until now, people have focused on the benefits of high interest rates for banks. They may now be starting to worry about the other side of the story.
If U.S. Treasury yields stay elevated, this bank-stock correction may not be over yet.