Following government bond yields can be crucial to understanding the underlying price action of banks stocks. Take this example of Canadian bonds and stocks. We can clearly see how, following a steady expansion in yields of various maturities, a trend break where bonds suddenly appreciated (yields go down when bond prices go up) the results were a change in trend for the bank stock (in this case CIBC). The inversion of the 3 month and 10 month yields resulted in a trend change confirmation on the smaller timeframes. This is not just a coincidence: bank business models are heavily influenced by their central bank regulator.
