Interest Rates & Banks

Euro interest rate swap curve Increasing IRS trend is halted, negative IRS for tenors up to 12 years

Bank credit rating & outlook Moody’s updates rating methodology

Interest Rates & Banks - Market observation per 23 August 2021 -

The Euro interest rate swap (IRS) curve decreases again after a period of increases

  • The decreasing trend has started in June ’21. In August ’21, the Euro IRS curve decreased and flattened slightly compared to previous month
  • The decrease is strongest for longer tenors and less prevailing for shorter dated maturities
  • As per 23 August ‘21, interest swap rates were negative for tenors up to 12 years

Moody’s took rating actions on various banks following update of its rating methodology

  • Moody’s adjustments to banks’ credit ratings are driven by a revision of the Advanced Loss Given Failure framework
  • The revision impacts the long-term issuer rating of Rabobank Group and Deutsche Bank, and the outlook of JP Morgan
  • The positive outlook for Deutsche Bank reflects the possibility that the bank’s progress in resolving business challenges could result in a sustained level of stability in its financial profile
  • In June ’21, Moody’s downgraded HSBC Holdings’ senior unsecured debt rating, concluding a review for downgrade. The outlook has changed from rating under review to stable. Moody’s had placed HSBC’s rating under review due to low profitability compared to peers and challenges the group faces to improve its profitability

S&P and Fitch have revised outlooks of several banks based on positive economic outlook

  • In June ’21, S&P revised the outlook of ING Group and Rabobank Group to stable on the back of macroeconomic recovery prospects. The downside risk for the bank’s operating environment are reduced due to robust government and ECB support, and a solid vaccine roll-out
  • Furthermore, S&P has changed the outlooks of JP Morgan, Bank of Amerika and Barclays from stable to positive and the outlook of BNP Paribas from negative to stable
  • In June ‘21, Fitch has upgraded Bank of America’s long term rating to AA-, based on its robust retail and commercial franchises network which will result in lower credit costs and strong, consistent earnings
  • Furthermore, Fitch revised Barclays’ outlook to stable, based on improved expectations for economic recovery in Barclay’s key markets