BNY Mellon Climbs as Fed Signals Rate Increases Next Year

Bank of New York Mellon Corp., the world’s largest custody bank, had its biggest two-day increase in 10 months after the Federal Reserve signaled it may boost interest rates next year.

The New York-based bank climbed 4.3 percent over the past two days, the most since former Federal Reserve Chairman Ben Bernanke first suggested in May that the central bank could begin to scale back its bond-buying program. The Fed yesterday said officials predicted their target interest rate will be 1 percent at the end of 2015 and 2.25 percent a year later, higher than previously forecast. Shares of custody banks State Street Corp. (STT), and Northern Trust Corp. (NTRS), also rose.

Custody banks, which keep records, track performance and lend securities for institutional investors, hold large amounts of cash in short-term instruments, which means their earnings would climb when interest rates increase. BNY Mellon is the most sensitive of the banks to changes in rates, Gerard Cassidy, an analyst with RBC Capital Markets in Portland, Maine, wrote in an e-mail.

BNY Mellon rose 2.3 percent to $34.96 at 11:40 a.m. in New York. The shares advanced 21 percent in the year ended March 19. Boston-based State Street rose 2.6 percent to $67.86, and Chicago-based Northern Trust climbed 1.3 percent to $64.75.

To contact the reporter on this story: Charles Stein in Boston at cstein4@bloomberg.net

To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net Sree Vidya Bhaktavatsalam, Pierre Paulden

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