Falling Rates Could Also Be a Headache for Banks

Rising interest rates created a liquidity problem for banks. But falling rates could give them an earnings problem.

One consequence of the surge of worry about banks has been a snapping back of the yield curve, as traders bet on a possible slowdown in the Federal Reserve’s pace of interest-rate increases.  Shorter-term yields are dropping much faster than longer-term yields. The curve remains mostly inverted, meaning shorter-term yields are for the most part higher than longer-term ones. But much less so.