Battered Banks Suffer Their Worst Week in More Than Two Years

(Bloomberg) -- Bank stocks just took a huge beating.

The KBW Bank Index plunged 8 percent this week, its worst showing since January 2016.

That’s a more than three-sigma selloff for the group, based on the weekly performance over the past five years. In other words, it’s an event that should happen less than 0.3 percent of the time under normal circumstances.

Financial stocks are sensitive to 10-year Treasury yields and the shape of the yield curve. The spread between two and 10-year Treasury rates lingered near its narrowest level of the cycle this week, with the longer-dated debt falling more than 3 basis points. Bullish theses for banks -- which include the tax overhaul, deregulation, and a boost to shareholder return programs -- may have also run their course.

©2018 Bloomberg L.P.

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