Wait for 10-Year Yields to Rise, FBR Capital's Miller Says on CNBC

FBR Capital's Miller thinks that even with the positive earnings season so far investors in the financial sector should way for the 10-year Treasury yield to rise.
By Michael Sheetz ,

NEW YORK (TheStreet) -- The U.S. financial sector continues to recoup its losses following the U.K. referendum to exit the European Union and now several big banks are beating estimates in the current earnings season.

Paul Miller, FBR Capital Managing Director and Head of Financial Institutions Research, is looking for guidance and a bounce in the 10-year treasury yield.

"If that 10-year continues to lay here, we don't think there's a lot of opportunity in banks at this point but as that 10-year comes up, if it does come up, then you're going to sit there and ... be buying these things all day long," Miller said on CNBC's "Squawk on the Street."

There is another refinancing boom on the way, according to Miller, who says "any of these institutions like a USB, PNC, or Wells Fargo (WFC) that's in that mortgage banking trade, we would be buying today."

Miller warns that "a solid refinance boom" would most likely result in "six to nine months of solid earnings coming out of somebody like Wells Fargo." It all comes down to what happens with the yield curve and interest rates, as if rates stay at current levels then a possible refinance boom will burn itself out.

"So far, the bank's earnings are better than we expected and the guidance has been better than expected. But we have to sit there and see," Miller added.

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