Another sign that cements the notion that investors are preparing for higher borrowing costs is the price action in the SPDR S&P Regional Banking ETF (NYSEArca: KRE). All KRE, the largest regional bank ETF has done over the past month is surge 7.5%.
A rising interest rate environment will throw a wrench into the financial markets. Nevertheless, bank-related exchange traded funds could weather the storm as financial firms have positioned ahead of the potential rate changes. KRE’s sensitivity to interest rates is well known. The ETF rose just 2% last year after surging 47% in 2013 when yields spiked. KRE’s holdings have an average beta of +0.44 to moves in the US 10 Year Treasury. [Look to Bank ETFs in a Rising Rate Environment]
“Of the 6,270 firms reporting third-quarter results, 59 percent had year-over-year earnings growth, the FDIC said Tuesday. The proportion of banks that were unprofitable declined to 5 percent from 6.6 percent a year ago and was the lowest since 2005, according to the agency,” according to Bloomberg.
Financial Select Sector SPDR
