“A flatter yield curve reduces the spread between the rate at which banks can borrow and lend because they fund most long-term loans through short-term deposits,” Goldsborough writes in a report on the regional bank ETF. “A steepening yield curve tends to have the opposite effect. So, investors in KRE should have a strong risk tolerance and a belief on a banking-sector recovery and a steepening yield curve.”
Margins at regional banks with a high percentage of variable-rate loans stand to benefit from rising rates, Bloomberg News reported.
KRE rose to a fresh multiyear high on Thursday. In fact, the regional bank ETF is at its highest level since the financial crisis.
SPDR S&P Regional Banking ETF
