Don't Ignore This Chart!

Surging Treasury Yields Paving The Way For Financials

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Over the past two trading sessions, treasuries are being sold hand over fist with corresponding yields soaring.  Financials have exploded higher on this development.  This is simply a continuation of what we've seen since the Brexit-related lows in June.  Those higher yields will add profits to the bottom lines of many financial companies, especially banks ($DJUSBK) and life insurance companies ($DJUSIL).  The relative strength in financials has been advancing along with the 10 year treasury yield ($TNX) since late June as you can see from the chart below:

Until Brexit, financial stocks were badly lagging the benchmark S&P 500, but that's changed in a big way since.  Throw in the Trump victory yesterday and rising yields and a strong financial sector seem to now be with us for awhile.  The group has become overbought, however, so it might be best to see some profit taking in the space before adding new positions or adding to existing positions.

Happy trading!

Tom

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Tom Bowley
About the author: co-founded Invested Central in 2004 and served as the site's Chief Market Strategist for more than 10 years. Invested Central provides stock market education and guidance for those interested in making their own financial decisions. During his tenure at Invested Central, Tom co-hosted Market Open LIVE, a national radio broadcast that covered many of the largest markets across the U.S. In addition, he has spoken at various conferences throughout the United States and Canada and has taught thousands of traders across the globe how to trade equities more wisely with an emphasis on managing risk and intermarket relationships. Learn More
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