Strong GDP growth is bad news for Citigroup (C)

That loud thud you heard yesterday morning at 8:30 a.m. was Chuck Prince, Citigroup Inc's (NYSE: C) CEO, hitting the floor following the much stronger than expected GDP report.

Citigroup, which has committed tens of billions of dollars to finance many of the larger private equity deals, will be stuck holding these loans on its books for much longer than it anticipated due to this report. The simple fact of the matter is the Fed will not be able to lower short-term rates with GDP growth of 4%.

Leaving short-terms rates unchanged means the yield curve will not change for the better and could actually change for the worse. If rates start heading higher, this means the loans the money-center banks are holding will drop even more in value.

Yesterday's GDP report means this post-PE bubble environment will be difficult to work through. Any easy fix of a slowing economy leading to the Fed dropping rates and a downward shift in the yield curve is not going to happen. Actually, it looks like the longer end of the bond curve was wrong in forecasting an economic slowdown, with the possibly of rates having to head higher. This means it is too early to get back into the money-center banks.