July’s jobs report, out last Friday, boosted bank ETFs, giving investors hope that the group will finally get the long awaited rate hike.
“Notably, JPMorgan broke out on Friday and overall contributes to the market’s positive tone. JPM has been diverging from yields for a few months now and its recent strength may be some evidence that the tactical bounce in yields has more to go. Positioning in 10-year notes remains aggressive on the long-side, and the recent back-up in JGB yields is a reminder how quickly these reversals can play out,” according to Strategas Partners by way of Barron’s.
With a steepening yield curve, or wider spread between short- and long-term Treasuries, banks could experience improved net interest margins or improved profitability as the firms borrow short and lend long. Yields on 10-year Treasury notes rose 7 basis points to 1.573% on Friday.
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PowerShares KBW Bank Portfolio