Mortgage Rates Rise and Bank Shares Soar as the Yield Curve Comes to Life

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Mortgage rates rose on Monday: The average 30-year mortgage rate is 3.77%, which equates to a $464.25 monthly payment per $100,000 borrowed, or $17.44 higher than the equivalent payment would have been a month ago.

If you were to opt for a shorter term, the average 15-year mortgage rate is 2.98%, which equates to a $689.62 monthly payment per $100,000 borrowed, or $12.90 higher than the equivalent payment would have been a month ago.

5/1 ARM = adjustable-rate mortgage with an initial fixed five-year interest rate. Data source: Bloomberg.

Interest and mortgage rates rise in the wake of Trump's victory, and bank shares are soaring

Protesters may be expressing their concerns regarding the prospects of a Trump administration in the wake of last Tuesday's election, but in one sector of the stock market, at least, investors' consensus view is very upbeat. The KBW Bank Index rose for the fourth consecutive day on Monday, by as much as 3.9% intraday, achieving its highest intraday level since May 2008. Individual bank stocks that experienced intraday gains of at least 3% include Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co. and Wells Fargo & Co.

Investors appear to be taking their cue from the steepening yield curve, as the 10-year Treasury note yield hit its highest level of the year on Monday, at 2.30%, according to data from Bloomberg. Banks' net interest margin -- a key source of profits -- is equal to the difference between the rate at which banks borrow funds and the rate at which they are able to lend them out. As the difference between short-term rates and long-term interest rates expands, bank profits increase. With regard to expenses, investors are betting that a Trump administration will roll back some of the regulations that were passed in the aftermath of the banking crisis.