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Big bank rally today


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Along with higher interest rates on the long end of the curve.

 

What is the explanation?

 

Is it due to the Saudi threat of selling U.S. treasuries and the Senate which voted unanimously yesterday to support the bill?

 

I could understand treasuries dropping in price but, why the banks? With the economy growing barely 0.5%, how is that helpful to have higher yields due to that threat? Seems very short sighted if that is the case.

 

And would they not sell other assets held in the U.S. including large stakes in financial institutions?

 

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I was guessing that it was because inflation came in higher, and the Fed has been saying they can't raise rates until inflation is higher, and so it increased the chance of a raise this year (and maybe June), which the banks are leveraged for.  No idea if that is right of course.

 

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The big US banks have sold off the past couple of weeks (with some down 6-8%) so part of the big move today may be because they were oversold. Regardless, they are still quite cheap. At current prices my favourite is Citi; they trade way below tangible book value and have a PE of about 9 (current year earnings). They are over capitalized and capital is growing faster than earnings (as they utilize their sizable DTA). Capital return will increase nicely this year. The next catalyst to the shares should be CCAR announcements in June. Hopefully Citi will be approved to return 12-15 billion over the next 12 months; if so, I expect the shares to pop.

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I think two

 

1  US inflation data

 

2  Japan GDP was actually annualized at 1.7% - much higher than anticipated

 

 

Market might be thinking the global slow growth may have bottomed and only up from this point , with US leading the way...    I could be a CNBC writer in another life LOL

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Thanks for the answers.

 

I thought it was really bizarre early on since the S&P was really weak relative to the banks. It has normalized now but, I can imagine the kind of the day we would have had if it had not been for the financial sector moving up so strongly.

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Definitely interest rates. Everything plunged after the Fed minutes were release at 2 pm today: Euro, Oil, S&P. Except the banks.

 

I still think it is a bit crazy since the banks won't do well if the market and the economy can't take at all a raise in interest rates.

 

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