The Yield Curve And Bank Net Interest Margin — Brian Romanchuk

One of the topics that comes up whenever government bond curves re-price is the relationship between the yield curve and bank net interest margins (NIM). This then morphs into a second question: does a yield curve inversion cause a recession by the (alleged) effect of the yield curve on bank interest margins, reducing the willingness of banks to lend?

This article will look at the first question: what is the relationship between the yield curve and bank net interest margins? The second question will be dealt with in a follow up article. I am including a fair amount of tutorial material, since this is projected to be a section in my banking primer book.

Bond Economics

The Yield Curve And Bank Net Interest Margin
Brian Romanchuk