The US financial sector was on track for its steepest daily slide since January as the Treasury yield curve flattened and investors remained concerned that Donald Trump’s policy initiatives may take longer to pass than previously thought.

The S&P 500 financials sector, which tracks the largest groups in the industry, declined by 1.6 per cent in late-morning trading in New York. That would mark the worst day since January 17, according to Bloomberg data.

Banks faced heavier pressure, falling by 2.6 per cent. Bank of America, among the biggest US lenders, skidded 4.1 per cent to $23.43, Wells Fargo dropped 2.5 per cent to $56.19 and JPMorgan Chase fell 1.8 per cent to $88.45.

Tuesday’s selling came as “bonds continue to rally, which is a headwind for banks,” said Ian Winer, co-head of equities at Wedbush, the investment bank.

Treasury yields, which move in the opposite direction of prices, were down broadly on Tuesday. However, longer-duration notes saw bigger declines in yield, causing the difference in ten and two year Treasuries to flatten to its lowest point of the month, according to Bloomberg data.

A narrower yield curve is seen as negative to lenders, since they borrow on short-term markets and lend for longer periods.

Mr Winer added that concern around government policy was also causing skittishness among investors. “Given the uncertainty around healthcare bill, the market is concerned other policy goals may take longer like de-regulation,” he said.

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