YC2YR Yield Curve (2-10 Spread) and XLF Financials ETF Weekly Charts; Yield Curve Leads the Banks

The bank orgy continues. It is all about the yield curve; the 2-10 spread. As YC2YR increases, the spreads between the yields widen providing advantages to banks with their lending programs. Banks can make more profits taking advantage of the yield differential.

It is easy to see the 2-10 spread leading the banks around by their nose. The charts show XLF responding to the yield curve with a 1 or 2-week lag. Banksters are drunk as skunks, cheering the blue lines, celebrating the rising yield curve knowing that their bonuses will increase. But the orange lines are denigrated and shouted-down. The crony capitalism filth system has no tolerance for a falling yield curve.

The yield curve bottoms just before Halloween, when Keystone scared the neighborhood children with his face, and he was not wearing a mask, and rises towards Thanksgiving. The banks bottomed in mid-November about a 3-week lag. It is interesting to see the yield curve pop for 3 weeks off the bottom in late October, and then pull back, and the XLF mimics the same pattern, 3 weeks up and then a pullback for a week.

The yield curve continues higher in early December for a couple-three weeks and then rolls over retreating thus far this week with today yet to play out. The XLF rallies this week after the low the previous week so following the pattern, banks should top-out over the next week or two. Simply watch the yield curve for clues on the banks.

The KRE regional banks ETF does not follow the pattern as closely as the XLF that represents the large money-center banks, insurance companies and other financials. This makes sense since the US remains in a housing recession as has been previously explained. The regional banks service the local home mortgage market so the soft housing sector is impacting the KRE more than the XLF. Both are making record highs but the XLF launches far higher with new record highs while the KRE has only just returned to the record high from a year ago.

Pull out your telescope and keep a close eye on the yield curve since it will send the banks one way or the other that then sends the stock market the same way. Land Ho!  This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added Saturday, 12/27/25: The yield curve ends the week at 0.66 with the high at 67 basis points a week ago. If YC2YR comes up to 0.67 and a bit higher printing a new high, the chart indicators on the daily basis should all be neggie d identifying the top on the daily basis. The weekly chart is in negative divergence now and has violated the upper standard deviation band and needs to come down. Thus, the expectation is that the yield curve is topping right now and should begin a multi-week move lower. The 20-week MA is 0.56 and it hugged that line and used it as support for the last 1-1/2 years so when she fails, it will be meaningful. The 50-wk MA is down at 0.47. XLF drops marginally in the Friday trade sitting at 55.62. The two charts above, and KRE, and the money-center bank's individual names (JPM, C, BAC, GS, WFC, MS, etc...), will be a key focus over the coming days and week or two.