MCH Analysis · Research
Graph 8 of 10 · Week of 3 Oct 2026Sector Deep-Dives

The 10y–2y curve explains only 9% of XLF's moves against SPY

Across 42 quarters, changes in the 10y–2y spread correlate +0.30 with XLF's return against SPY, an R² of 9%. XLF has trailed SPY by 24% since January 2016 and returned -12.0% relative to it over 12 months.

Prices through 1 Oct 2026Treasury yields through 30 Sep 2026Universe 38 banks + XLF, SPY
Curve explains (R²)
9%
of quarterly XLF-vs-SPY moves; 42 quarters, correlation +0.30
10y–2y spread now
+0.41pts
-0.15 pts vs a year earlier
XLF vs SPY, 12 months
-12.0%
universe banks basket -4.1%
XLF vs SPY since 2016
-24%

Financials relative to SPY

Ratio of total-return prices, indexed to 100 in January 2016; below 100 = lagged SPY since then

Source MCH research warehouse, daily adjusted closes (Alpha Vantage)
Weekly (Friday) values. The bank basket is rebalanced daily to equal weight across names with a price that day.
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10-year minus 2-year Treasury yield

Percentage points; below zero = inverted curve

Source MCH research warehouse, macro series (US Treasury constant-maturity yields)
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What it means · inference

  • Most of XLF's relative moves come from other drivers
  • Fitted +5.9% per point of steepening is a weak guide

For investors · general, not personal financial advice

  • Judge banks on credit and earnings, not the curve alone
  • Spread is +0.41 pts, flatter than a year ago

What would change it

  • Steepening matched by XLF outperformance for several quarters
  • Credit losses or deposit flight swamping both series

Method

  • What is measured: XLF and an equal-weight basket of the reader-safe universe's banks, each relative to SPY and indexed to 100 in January 2016, against the 10-year minus 2-year Treasury spread, daily since January 2016. Two charts, no shared axis.
  • Correlation and R² use non-overlapping quarter-end changes: log change in XLF/SPY versus the change in the 10y–2y spread (42 quarters).
  • Total-return (dividend-adjusted) closes. XLF is a cap-weighted ETF used as a benchmark; the bank basket uses only reader-safe universe names (GICS Diversified Banks and Regional Banks).
  • Prices run through 1 Oct 2026 and Treasury yields through 30 Sep 2026; the two series are compared on their own dates.
  • Survivor bias: history is computed on today's reader-safe universe (38 names in this group), so companies that left the market earlier are missing.

Sources

  • MCH research warehouse, daily adjusted closes (Alpha Vantage).
  • MCH research warehouse, macro series (US Treasury constant-maturity yields).

Universe

Names in the published feed886
Excluded: held, suspended, withdrawn, deferred, deal-pending or pending review54
Reader-safe universe832
Universe names in GICS Diversified or Regional Banks38
Used in this exhibit38

Names whose rating is held, suspended, withdrawn, deferred or under a pending deal are excluded from every exhibit, so no held output appears here.

General and impersonal investment research. Not personal financial advice. Forecasts, valuations and model outputs are estimates and may be wrong. See Investment Disclaimer.

MCH Analysis is a general investment-research publication of MCH Advisory (Pty) Ltd. It is not personal financial advice and does not take your circumstances into account. MCH is not a licensed financial services provider or a registered investment adviser. Past performance, whether actual or simulated, does not predict future results. Subscriber Agreement | Privacy and Cookie Notice | Research Governance Policies