The Importance of Higher Yields

Banks should be highly sensitive to interest rates, he writes. Each 100 basis point rise in interest rates across the term structure will cause liabilities to increase in value by 4%. If banks leveraged at 10 to one, their equity return would consequently collapse by some 40%. So if you're looking and calling for demand and higher yields, higher interest rates, aren't you making argument that there would be continued added stress on the banks? This isn't trying to- Yep, exactly. We've just seen that, haven't we? We have interest rates, and we've seen bank calls with big collapse.

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