helping Barack Obama with his golf score
was not one of the reasons Janet Yellen
gave for why the Federal Reserve is
going to proceed cautiously with future
interest rate rises that was just a man
thing that Donald Trump said last year
when he accused the Fed chair of keeping
rates low at the behest of a president
who wants to be out playing golf and
doesn't want to see a bubble bursting
Magellan's dovish remarks on tuesday
showed her concern not with mr. obama
but with financial markets and markets
responded to her remarks in predictably
straightforward fashion by sending
equities higher with the exception of US
bank stocks the sp500 banks index fell
sharply on this yellen's remarks and
although it rebounded on Wednesday
morning that see-sawing suggests a
complicated debate about how investors
should think about this sector this year
banks have traded as if as a proxy for
year-end rate expectations they went
down as skepticism was growing that the
Fed would follow through with all those
2016 rises it had predicted in its
official projections and the sell-off
crescendoed in February when markets
were implying that there may be no rate
rises at all this year and long-term
rates had fallen with the deteriorating
outlook for the global economy in China
low rates narrow the available margin
between banks cost of borrowing and the
interest that they can charge on lending
now because the gloom over the long-term
economic outlook has lifted somewhat
since February as yellen's promised this
week of lower rates for longer is likely
to have the effect of steepening the
yield curve and helping bank
profitability hence that rebound on
Wednesday morning the biggest banks in
the u.s. may catch other tailwinds to
shareholders and analysts have begun
debating strategic options for improving
returns the well-connected analyst team
at kbw has suggested that Citigroup
should break itself up and at least one
significant shareholder at Bank of
America has told its chief executive
that they believe the company should
separate the retail bank from the
investment banking and wealth management
arms now these are isolated calls for
now but if they take hold then bank
investors may have more to consider than
just the likely level
of us interest rates at the end of the
year and the end of the Obama
administration when of course the
president will be tending to his golf
score full time Stephen Foley for the
Financial Times