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The Yield Curve And Bank Net Interest Margin — Brian Romanchuk

Summary:
One of the topics that comes up whenever government bond curves re-price is the relationship between the yield curve and bank net interest margins (NIM). This then morphs into a second question: does a yield curve inversion cause a recession by the (alleged) effect of the yield curve on bank interest margins, reducing the willingness of banks to lend?This article will look at the first question: what is the relationship between the yield curve and bank net interest margins? The second question will be dealt with in a follow up article. I am including a fair amount of tutorial material, since this is projected to be a section in my banking primer book.Bond EconomicsThe Yield Curve And Bank Net Interest MarginBrian Romanchuk

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One of the topics that comes up whenever government bond curves re-price is the relationship between the yield curve and bank net interest margins (NIM). This then morphs into a second question: does a yield curve inversion cause a recession by the (alleged) effect of the yield curve on bank interest margins, reducing the willingness of banks to lend?

This article will look at the first question: what is the relationship between the yield curve and bank net interest margins? The second question will be dealt with in a follow up article. I am including a fair amount of tutorial material, since this is projected to be a section in my banking primer book.

Bond Economics
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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