Interest Rates & Banks

Euro interest rate swap curve Increase in IRS continues, negative IRS for tenors up to 7 years

Bank credit rating & outlook Moody’s: HSBC Holdings’ rating on review for downgrade (*)

Interest Rates & Banks - Market observation per 17 May 2021 -

The Euro interest rate swap (IRS) curve continues to increase

  • In May ’21, the Euro IRS curve steepened and increased as per the direction that started mid-December ‘20
  • The increase is strongest for longer tenors and less prevailing for shorter dated maturities
  • As per 17 May ‘21, interest swap rates were negative for tenors up to 7 years

Fitch has positively changed the outlook of selected banks

  • In May ’21, Fitch revised the outlook of Citigroup from negative to stable. The outlook revision reflects better than expected credit fundamentals and overall stability in Citigroup’s operating environments
  • Furthermore, Fitch has changed JP Morgan’s outlook from negative to stable. This reflects Fitch’s view that JP Morgan’s performance and projections are in line with the bank’s high credit rating
  • Both outlook revisions are supported by Fitch’s increased confidence in economic recovery in the US, reducing the probability of a downside scenario

Moody’s placed HSBC Holdings’ credit ratings on review for downgrade

  • HSBC’s low profitability compared to peers with similar credit assessment supports the review for downgrade, according to Moody’s. Furthermore, the review is supported by challenges the group faces to improve its profitability
  • In Q1 ’21, HSBC has published a strategic plan. Moody’s believes the plan is credit positive but challenging to achieve. During the review period Moody’s will assess whether HSBC will be able to improve its profitability in a timely manner