Rising interest rates are bad news for bank stocks
A return to tightening by the Reserve Bank would penalise the major bank stocks and dent momentum in the mortgage market, negating the assumed benefit from improved lending profits from passing through a possible August cash rate increase.
Banks started the new financial year in the red on Monday. Commonwealth Bank is down around 1.5 per cent since official data last week showed Australia’s May consumer price index rose 4 per cent in annual terms. This has raised the chances of an RBA rate rise at this month’s meeting as the central bank tries to get inflation back into its 2 per cent to 3 per cent target band.