Bank Stocks Slammed As Treasury Curve Crumbles To 6-Month Lows

Tyler Durden's picture

US financial stocks - the "no brainer" trade of so many TV talking heads - appear to have finally realized that the yield curve is not steepening and even deregulation may be further away than hoped.

Bank stocks are almost unchanged on the year - erasing gains of almost 10% after Trump's speech to Congress...

 

As the Treasury yield curve has collapsed to its flattest levels since October...

 

And remember, the stocks of the banks have totally decoupled from their credit market perception of risk...

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buzzsaw99's picture

...the sound of inevitability. [/agent smith]

BigFatUglyBubble's picture

"I Am Jack's Complete Lack of Surprise" - Fight CLub

E.F. Mutton's picture

Oh I get it, bring down the economic house now, and blame Russia/Syria, or North Korea. 

Not the Fed or years of assholian monetary policy. 

And get a Free War in the process, how awesome is that?

JRobby's picture

Assholian Monetary Policy as taught by FED STOCKED ACADEMIA for DECADES by faculty that got their degrees in ASSFUCKISTAN?

This is all by design. And it needs to stop soon. REAL soon.

wisehiney's picture

Be right and sit tight.

Get paid to wait.

Muad'Grumps's picture

This is why the Fed may begin to sell treasuries soon. Not just re-investing maturing bonds, but outright selling. To steepen the curve.

buzzsaw99's picture

All right, you win. You win. I give. I'll say it. I'll say it. I'll say it. DESTINY! DESTINY! NO ESCAPING THAT FOR ME! DESTINY! DESTINY! NO ESCAPING THAT FOR ME! [/Young Frankenstein]

wisehiney's picture

That would be massively deflationary.

Muad'Grumps's picture

Actually not deflationary in the respect you think. If the bond bubble pops, yes, some capital will be destroyed, but a lot will flee bonds seeking other safe havens. Credit aggs would collapse. M3 growth would be lower than MZM. Even though money is being destroyed you would still have hyperinflation.

wisehiney's picture

The fed tried it once before in 1937.

The rest is history.

JRobby's picture

"Ding, Ding, Ding, Flashing Lights, Sirent Sounding!"   Correct!

Truth Eater's picture

My guess is that there will be a severe deflation hit first.  Hyperinflation is a voluntary response of the banking system.  I cannot say for certain this time will be the same and that they will dump money out of helicopters.  A crash of the dollar could be brought about in 2 ways: loss of confidence in the system and/or excessive dollars floating around.  There is no advantage to the bankers to give away free money and extinguish debts.  Debts are their power.  Debts let them sieze assets of real value.

Muad'Grumps's picture

You don't need helicopters dropping money for HI. The money has already been printed. It's in the form of bonds. The money printing is a symptom of higher order monetary aggregates collapsing to Money of Zero Maturity. You don't need fiscal stimulus or the CBs cutting everybody a check. All HI is whether you have a bond market or not. Money coming from helicopters is really debt being liquidated. Bonds will sublimate to cash equivalents.

The HI this time around in the developed world won't be wheelbarrowsful of cash. It will be electronic cash balances ans lack of stock on store shelves. Retailers will have a separate price for debit transactions and another for credit card transactions. Commercial credit for the supply chain might be unavailable. Strictly wire payment in full prior to delivery.

Truth Eater's picture

Bonds are not money.  They are promissory notes only as good as the originator.  In the open market, when there are no buyers of bonds, they drop in value.  That is money evaporation if you think bonds are money.  The inflation cannot happen unless the bond-holder can exchange the bond for something fungible and valuable.

Money from helicopters would be like tax rebates, government grants, increased SNAP & welfare, etc.  The extra money could be used to pay off debts- yes, extinguishing debts.  They only do that temporarily for timing so that the uprising does not occur too soon.

Muad'Grumps's picture

You miss my point. M3 can actually drop during a HI. Bonds will sell off at discount to make MZM grow. The money supply can actually drop and you can still have HI. 

Remember HI is not really inflationary. Nobody wants to be a creditor in a HI. HI occurs in a deflationary context. 

Ask yourself does an economy really grow in a HI? 

orangegeek's picture

Malls are dead.  Retail is dead.  Cars are dead.  No one is buying.

 

Chi-coms bidding houses to the moon - and when this dries up - watch out.

NugginFuts's picture

I would put hard money on the Chi-com bid ending relatively soon here. Unless those 150k soldiers on the NK border are looking to board a boat and buy real estate in Seattle or something.

Truth Eater's picture

So, we will see Deutsche Bank crash.  Which big one next?  I suspect they will still protect GoldmanSachs and JPM.  Will they sacrifice Bank of America or Citi?  Wells Fargo?  And what industries must go down before the banks?  I just know that there is a bubble out there loaded with its own excess supply of pins that will spray out to other bubbles when it blows.  What magic bubble healer will the Trump team try to apply?  And how cold will the world banks be in bringing this era down? 

Muad'Grumps's picture

Have you noticed SHLD? Is this just inflows into ETFs keeping this baby alive? Doesn't look like a short squeeze. Perfect example of the stupidity of passive indexing.