As we await the Fed’s interest rate decision this week, it’s a good time to review a key area of the market that is heavily swayed by the direction of interest rates – banks ($DJUSBK). As the 10 year treasury yield ($TNX) rises and the yield curve steepens, the net interest margin (key profit driver) for banks grows. The chart below illustrates that there’s a fairly tight positive correlation between the direction of the TNX and the direction of the DJUSBK. Recently, the TNX came under some pressure and that took a toll on bank stock prices.