Wall Street’s Paper Bond Losses Rear Head Again as Yields Rise

After investment losses tore through the US financial system this year, a fresh slump in bank stocks shows some investors fear the problem — which at its most extreme claimed a handful of lenders — hasn’t gone away.

Unrealized losses on bank securities’ portfolios will likely increase in the third quarter after a steep rise in yields eroded the value of those holdings, according to analysts. That’s contributed to a sharp decline in bank stocks, with the KBW Bank Index falling 6% since a September Federal Reserve meeting signaled another hike could be on the way. The index is down ...