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ARK Invest CEO/CIO Cathie Wood mentioned on 2021-01-08:

We're seeing the yield curve steepens, i.e. long rates are going up but short rates are not, because the Federal Reserve is holding them down. This is usually good for financial stocks.

Why does a steepening bond yield curve usually result in a price increase for stocks in the financial sector?

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  • It didn't say for all "stock". It is only for stocks of banks and lenders.
    – base64
    Commented Feb 10, 2021 at 5:37
  • @base64 thank you, I had misinterpreted "financial stocks". Commented Feb 10, 2021 at 5:41

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Banks' business is maturity transformation. Their assets (loans) are long-dated and their liabilities (deposits) are short-dated. A steep yield curve leads to high profits, e.g. receive 7% loan interest payments and pay 1.5% deposit yield.

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