The stubbornness of treasury buyers has kept a lid on treasury yields and, as a result, banks ($DJUSBK) have struggled to determine which direction they should move. Well.....this morning's reaction to an upwardly-revised GDP number (TNX up 7 basis points to 2.29% at last check) for the first quarter and the Fed's decision to lift restrictions on banks paying dividends and buying back shares seems to have resolved that issue. The 10 year treasury yield ($TNX) is having its biggest spike in a few months and banks are benefiting. Check out this chart:
That's a serious jump in banks and, barring a major reversal later today in both the DJUSBK and TNX, I'd look for further gains in banks this summer now. Also, the 2.30% level has been a key pivot level in the past on the TNX and there's bullish wedge resistance at that level as well. Therefore, view a break above 2.30% as a major upside breakout, further adding to bullishness in banks and life insurance companies ($DJUSIL).
Happy trading!
Tom
