Pfizer, BioNTech Vaccine News Boosts Interest Rates And Bank Share Prices
It is not just Big Pharma that is reaping a windfall from the positive news on the COVID-19 vaccine front, but big banks as well.
Pfizer and BioNTech’s release of promising vaccine trial data not only triggered a big increase in their share prices, it also helped push long-term interest rates higher.
With banks having struggled for years with anemic interest rates, the sharp upward turn in the bond market has analysts and bank executives looking up again, the Financial Times reports.
The brightening outlook on the vaccine front offers the potential for stronger economic growth in the months ahead, with the likelihood of a pickup in business activity across the board as restrictions are eased.
The prospect of stronger growth ahead, in turn, sets the stage for a return to higher interest rates and more profitable lending by banks, experts say.
The vaccine news will be “will be good for banks,” fueling “reflationary outcomes” and providing “more slope to the yield curve,” Stephen Scherr, Goldman Sachs chief financial officer, noted Monday (Nov. 9) in remarks at a conference, according to the FT.
Investors were already on the case, pushing up the share prices of J.P. Morgan Chase and Bank of America, both of which jumped 14 percent on Monday, before edging down by less than a percent Tuesday morning (Nov. 10).
Regional banks like Comerica and M&T Bank also posted big gains, rising 20 per cent and 25 per cent, respectively, with Comerica up .37 percent late Tuesday morning, and M&T down by .76 percent.
Even a relatively historically modest increase to today’s rock bottom rates — say 1 percent — could be a boon to the bottom line of banks.
The four largest lenders in the United States would get a $22 billion boost in revenue if rates were to rise a single percent, according to the Financial Times.
Meanwhile, the good vaccine news is also boosting the stock prices of businesses in an array of other sectors, especially those that rely on large groups of people gathering, such as restaurants, cruise ships and movie theaters.