US treasury bond yields caught out many investors in the first quarter, tightening sharply below 4% in February and once more wrong-footing many who had been expecting that they would widen.
Financial institutions have benefited so far. The four US investment banks that announced first-quarter earnings last month had bumper trading quarters, whether from proprietary or customer trading. All easily beat equity analysts' consensus earnings per share numbers as a result, Goldman Sachs managed to do so by 50%.
As for commercial banks the Federal Reserve's weekly h-8 report shows that unrealized securities gains at the "large domestically chartered banks" spiked from $5 billion at the end of January to $12.9 billion in mid-March.
Their holdings of mortgage-backed securities also increased, rising 27%, or $81.8...
