Overall, it's been a rather pleasing day for the S&P/ASX 200 Index (ASX: XJO) and ASX shares. At the time of writing, the ASX 200 has gained 0.4% to back over 7,100 points. But the same certainly can't be said of the Commonwealth Bank of Australia (ASX: CBA) share price.
CBA shares are currently in the red. And decisively so. The ASX 200's largest bank share is currently down by a painful 4.36% at $97.52 a share.
So what's behind this unusually large drop for CBA, especially on a day that has the market up?
Why has the CBA share price crated on Wednesday?
Well, it's got nothing to do with anything out of the bank itself, seeing as CBA has made no new ASX announcements for days now. But we did have some big news yesterday that looks to be impacting most ASX bank shares today.
As you may have heard, yesterday saw the Reserve Bank of Australia (RBA) raise interest rates by a surprising 50 basis points, taking the cash rate from 0.35% to 0.85%. Most commentators weren't expecting such a large rise, which is the first time the RBA has hiked rates by 50 points in decades.
CBA isn't the only bank feeling the pain. All ASX 200 banks are down today, including all four of the majors. It could have been worse for CBA too. Westpac Banking Corp (ASX: WBC) shares are down close to 6%. Bendigo and Adelaide Bank Ltd (ASX: BEN) has lost close to 7%.
As my Fool colleague Bernd covered earlier, rising rates do have the potential to lift banks' margins. However, higher rates also increase funding costs for banks, and put pressure on house prices. The latter isn't good news for banks, especially ones with large mortgage exposure like CBA.
So this is the probable reason why Commonwealth Bank shares are suffering today.