NEW YORK (TheStreet) -- iShares 20+ Year Treasury Bond (TLT), an exchange-traded fund, broke out of its consolidation pattern on Tuesday, jeopardizing regional bank prices and broader equity market strength.
Weak U.S. economic data have spurred an uptrend in Treasuries since January and have pushed interest rates lower. The trend continued Tuesday as a reading on consumer confidence for February declined from January, pushing the price of government bonds higher as anxious investors pulled funds from equity markets.
Declining U.S. interest rates have weighed on SPDR S&P Regional Banking ETF (KRE) prices as lower long-term rates indicate falling profits.
Regional banks pay next to nothing on short deposits while charging a rate, often linked to Treasuries, on the long-term loans they issue. When yields on long-dated Treasury decline, the margins on loans fall and the banks' profits decrease.As rates have fallen the past two months, regional bank prices have lagged the broader market. If Treasuries continue to trend higher, regional banks could again see selling pressure, which could weigh on equities overall. (SPY) is trading at the 185 level, with major overhead resistance pressuring prices. For investors to push the index to record highs, there must be a catalyst or sector leading the way higher. Investors will watch Federal Reserve Chairwoman Janet Yellen's testimony before the Senate Banking Committee this week, and hope that her comments on weather and policy will shake off anxiety and propel stocks higher. TLT data by YCharts
At the time of publication, the author had no position in any of the funds mentioned. Follow @macroinsights This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV