By Dhirendra Tripathi
Investing.com – Shares of major banks were trading weaker as bond yields drifted lower in Monday’s premarket trading, a day before they kick off the second-quarter earnings season.
Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), JPMorgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) were all trading lower by 0.4%-0.7% as the market prepares for most to announce their earnings this week.
The outlook for bank earnings has been hit by the marked drop in bond yields in recent weeks, as fears of the economic rebound flattening out have overshadowed concerns about high inflation. Falling bond yields depress banks' lending margins and consequently their profitability.
A big reason behind the fresh skepticism has been the coronavirus’ rapidly-spreading Delta variant. New cases of infection and deaths have again been on the upswing in parts of U.S., the U.K. and Europe, as well as southeast Asia.
The yield on the United States 30-Year Treasury bond has traded below 2% again lately, ruling mostly flat at 1.97% at 8.40am ET today. The United States 10-Year benchmark was 1 basis point lower at 1.34%.
The yield on the United States 5-Year, more sensitive to expectations of short-term interest rate changes, was also down a basis point at 0.77%.
One basis point is one-hundredth of a percent. Bond yields and prices are inversely related.