Impact of Higher Yields (by Mike Paulenoff)

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The ProShares UltraShort 20+ Year Treasury ETF (NYSE: TBT) is pushing up through important 6-month resistance, which projects considerably higher and is another way of saying that the yield curve could get considerably steeper in the near future.

If that proves to be the case, then major money center banks that provide loans should be able to capture a much wider spread (profit-margin), especially if the Fed holds rates at zero for the foreseeable future, as Chairman Bernanke suggested on "60 Minutes" last Sunday evening.

Add in the income and payroll tax cuts, and perhaps loan demand will begin to surge, all of which could be extremely bullish for big banks like Bank of America (BAC). Finally, from a technical perspective, BAC appears to be about to thrust out of a 4-session bull flag formation in the aftermath of its recent upmove from 10.91 to 11.88, which should propel prices directly to test its Apr-Dec resistance line, now at 12.33. If hurdled, this will trigger a powerful follow-through to test the prior rally peak at 12.76.

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Originally published on MPTrader.com.

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