“Does a dog move faster when it’s on a leash or off the leash?” Neil Dutta, head of U.S. economics at Renaissance Macro Research, asked. “The market sees the banking industry as a dog off its leash.”
Meanwhile, the steepening yield curve, with yields on benchmark 10-year Treasuries up to 2.12%, also helped bolster the financial sector outlook. The widening spread between yields on short- and long-term debt helps support net interest margins and profitability on loans for banks.
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Treasury prices have declined while yields jumped in response to rising inflation expectations after Trump’s inflationary proposals. For instance, Trump has promised protectionist trade policies, enhanced public spending and tax cuts during the campaign trail.
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