Financial ETFs rise as yield curve steepens to a four-year high

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Financial-sector exchange-traded funds outperformed Tuesday as bond yields rose and the spread between yields of different maturities widened. The Financial Select Sector SPDR Fund was up 0.6% at midday, and the Vanguard Financials ETF rose 0.8%. The Invesco KBW Bank ETF jumped 1.7%. In the month to date, that fund is on track for its best showing since April. Banks and financial institutions make money by borrowing and lending money at different rates, which is easier when there’s a bigger spread between the two. That spread, known as the yield curve, is at its widest since December 2016, by one measure. It’s harder for the yield curve to steepen when yields are so compressed, which is why investors think higher rates are better for banks.
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