Monday, June 3, 2013

Jamie Dimon's $5 billion bet against bonds

Most of the big banks say they will make money from rising rates. They can't all be right.

Fortune writes:  “Interest rates have been rising lately. And a lot of people are nervous about what will happen when the Federal Reserve stops buying bonds in the next year or so. Warren Buffett is watching. One group of people not among the rate worrywarts: Bank CEOs. Nearly every bank executive seems to be predicting his bank will make money, in some cases a lot more and seemingly overnight, when rates rise.

….For the time being, bank investors seem to be siding with the CEOs. Shares of the big four banks, Bank of America, Citi, JPMorgan Chase, and Wells Fargo, have all been rising lately despite the recent rise in rates. The problem is that's not the way things have played out before. Rising interest rates, particularly sharp increases, have generally been bad news for banks' bottom lines. That's what happened in 1994 when the rates jumped 3%.

But bank analysts say it could be different this time around…..

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