A taper test for struggling insurers

Easy monetary policy is distorting the relationship between US Treasury yields and insurance stocks. The taper will see yields spike – which may push insurers lower still.

Recent trading history suggests domestic insurers want US Treasury yields to be lower. Since the non-taper of September, the US government shutdown and debt ceiling dramas have stirred the yield on the 10-year US Treasury note marginally higher, and the resulting higher interest rates available for insurers have pushed their share prices down. And all of this is taking place despite higher rates equating to higher investment earnings for insurers.

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