By Steve Goldstein
U.K. banks rose on Monday, buoyed by margin hopes as the gap between short- and long-dated bond yields climbs.
HSBC Holdings (LON:UK:HSBA) , Lloyds Banking Group (LON:UK:LLOY) and Barclays (LON:UK:BARC) contributed the most to the FTSE 100’s (FTSE:UK:UKX) rise on Monday. Bond yields have climbed globally on hopes that the rollout of COVID-19 vaccines as well as new stimulus will help to reflate the global economy. But promises by the Federal Reserve, the Bank of England and other central banks have anchored yields on the short end.
Banks typically lend at longer maturities and fund themselves at shorter maturities, so a steepening yield curve helps their profits.
The rise in bond yields has proved welcome relief to U.K. banks. The FTSE 350 bank index (FTSE:XX:189731) , while up 14% this year, has dropped 30% over the last three years, according to FactSet data.
That same rise in bond yields was a weight on technology stocks. Scottish Mortgage Investment Trust (LON:UK:SMT) , which holds a collection of leading tech companies, fell 5%, and antivirus software maker Avast (LON:UK:AVST) fell 4%.
Shares in educational publisher Pearson (LON:UK:PSON) fell as much as 5% before then turning around and rising 6%. The company’s results and outlook were largely in line with expectations, as it set out plans to sell its international courseware local publishing businesses and occupy less property.