- Bank stocks slipped on Tuesday for a second consecutive day, with a roughly three-week rally losing steam, as overnight borrowing costs soared. The Russell 2000 Value index .RUJ also lost ground and 10-Year Treasury yields fell.
Repo rates, the cost for banks and Wall Street dealers to borrow dollars, were elevated, exposing cracks in U.S. money markets in advance of a Federal Reserve monetary policy meeting where traders widely expect an interest rate cut. But bank stocks already rose 13% between Aug. 23 and Sept. 13, while the Russell 2000 Value index .RUJ rose 10.6% and the 10-year Treasury yields US10YT=RR climbed from 1.459% on Sept. 4 to end the Sept. 13 session at 1.899%.
“Investors had probably gone too far into the fear trade,” and then the rebound was due to “a pause in trade tensions and maybe over-optimism” said Burns McKinney, portfolio manager with Allianz Global Investors in Dallas.