Why bank bonds are sitting ducks in the next downturn

Two years ago I developed a thesis about the negative effect of the Federal Reserve's interest rate policies on bank balance sheets based on my understanding about the history of zero rates in Japan. For bank bond investors, this should be worrisome.

In November 2010, I wrote a post noting that the long end of the yield curve would come in due to the Fed's zero rates, flattening the yield curve and compressing interest margins. This is what we witnessed in Japan in the aftermath of their hous...

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