Bankers are witnessing diminished demand for big loans out of businesses partly due to uncertainty over policy action on Capitol Hill. In addition, while the Federal Reserve’s rate hikes have helped banks earn more on loans, benefits were partially pared down by declines in long-term rates, with yields on Treasuries falling over the second quarter.
“Still, many bank stocks remain underloved, and today’s appetite for XLF calls marks a change of pace for the ETF. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the fund’s 10-day put/call volume ratio of 1.26 is in the 72nd percentile of its annual range, pointing to accelerated put buying over call buying during the past two weeks,” according to Schaeffer’s.
Even with the rate hikes, there are concerns about the central bank’s dovish tone and its impact on ETFs such as XLF. It is expected the Fed will boost borrowing costs one more time before the end of this year and that as many as three rate hikes could be on tap for 2018.
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