Why bank stocks are tumbling even as interest rates climb

MUCH AS HIGHER milk prices are typically good news for dairy farmers, higher interest rates are meant to be good news for bankers. Conventional lenders make their money on the difference between the interest they pay out to depositors and the interest they earn on loans and investments. As rates rise, that gap widens. And as interest rates are set by central banks that only tend to raise them when the economy is strong—when jobs are plentiful, spending is high and inflation is climbing—rising rates typically also imply that borrowers will be well placed to repay their debts.Treasury yields and interest-rate expectations in America have marched higher since the middle of December, when the Federal Reserve announced it would accelerate plans to taper its asset purchases. The yield on ten-year Treasuries climbed to 1.9% on January 18th, its highest level in two years. As recently as October investors expected just a solitary interest-rate increase from the Fed in 2022. But they have rapidly revised expectations as consumer-price inflation has surged, pencilling in between four and five rate rises over the course of the year.