Now low rates are bad for banks too

This is really no surprise. Any NIM institution starts getting hurt one the curve compresses in the way it has. The shot from low rates only worked as long as the middle part of the yield curve was attractively higher. That's over --------------------------------------------------- http://online.wsj.com/article/SB10001424052748703471904576003880782571372.html?mod=WSJ_hp_LEFTWhatsNewsCollection... [more]

This is really no surprise. Any NIM institution starts getting hurt one the curve compresses in the way it has. The shot from low rates only worked as long as the middle part of the yield curve was attractively higher. That's over --------------------------------------------------- http://online.wsj.com/article/SB10001424052748703471904576003880782571372.html?mod=WSJ_hp_LEFTWhatsNewsCollection Historically low interest rates are starting to take a toll throughout the financial industry, presenting a potential downside to the Federal Reserve's aggressive efforts to reignite growth in the sluggish economy. Rock-bottom rates are squeezing profit margins at banks that rely on the gap between what they charge borrowers and pay depositors. They also are hurting returns at pension funds already under mounting pressure to meet obligations to retirees, while making certain kinds of insurance more expensive as firms try to recoup earnings that are likely to shrink if the ultralow rates linger. Meanwhile, insurers are protecting themselves against lower returns by pushing up prices or cutting back on the products they offer. One example: People with policies that help pay for future nursing-home and assisted-living bills are getting hit with increases of 10% to 40%. And some consumers wanting to buy a policy are finding limited options. In November, MetLife Inc. said it would no longer sell long-term-care policies. John Hancock Financial, a unit of Manulife Financial Corp., had already suspended sales of these policies to employee benefits programs. Few industries have as much interest-rate risk as life insurers, which invest premiums largely in bonds. Earnings on those investments help determine how they charge for their products and how much profit they make. ----------------------------------------------------------------- And now the costs of seeking insurance are going up(more deflation?) --------------------------------------------------------------------- Some insurers also are raising prices on popular forms of universal life insurance that are used by the well-to-do for estate planning. Meanwhile, soon-to-retire baby boomers are experiencing another unintended consequence of low interest rates: higher prices and less choice in retirement-income variable annuities. "The sustained low interest rates have really wreaked havoc on long-term-care insurers," says Jesse Slome, executive director of the American Association for Long-Term Care Insurance, a trade group. He estimates that insurers need a 10% to 15% increase in premiums to offset every one-percentage-point decline in long-term interest rates. [less]