• Banks are impacted by interest rates
    • They lend to borrowers at long-term rates or floating rates
    • They borrow themselves at short-term rates
    • They earn a spread between the two (long-term rates are usually > short-term rates)
      • This spread is called "net interest margin)
      • Banks do better when the spread is larger (wider yield curve)
      • Banks do worse when the spread is tighter (flat yield curve)