Bank Shares Extend Losses As Growth Worries Mount  

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Bank Shares Extend Losses As Growth Worries Mount  
Credit: © Reuters.

Dhirendra Tripathi

Investing.com – Shares of banking and lending companies extended losses for the second consecutive day amid fears the Delta variant of the virus could derail the revival in the global economy.

Citigroup (NYSE: C ), Goldman Sachs (NYSE: GS ), Wells Fargo (NYSE: WFC ), Morgan Stanley (NYSE: MS ) and Bank of America (NYSE: BAC ) were all down 1.5%-2%. JPMorgan  (NYSE: JPM ) shed the least, falling 1%.

The outlook for bank earnings has been hit by the marked drop in bond yields in recent weeks, as fears about resurgent inflation have given way to concerns that the economic rebound may be flattening out. Falling bond yields depress banks' lending margins and consequently their profitability.

Treasury yields were headed lower Thursday, too, though there was some small recovery from the day’s lows. The United States 10-Year was down 2 basis points at 1.29% as worries over the pace of global economic rebound increase and investors look for safe havens. At one point, it was down 7 basis points.

Yield on the United States 30-Year dropped by a basis point to 1.92%. The yield on the United States 5-Year , more sensitive to expectations of short-term interest rate changes, was down 3 basis points to 0.74%.

Yields and prices are inversely related and one basis point is one-hundredth of a percent.

The reversal in yields comes after they made new highs in March, when worries over inflation were dominant. Those worries are still not over, but for now, they are sharing the space with concerns over GDP growth.

Even as vaccinations quicken and people return to work and travel, the fast spread of the Delta variant of the coronavirus is the latest headache for policymakers, bankers and economists in balancing growth and inflation targets.

 

 

 

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