Interest Rates & Banks

Euro interest rate swap curve Increasing IRS trend continues, negative IRS for tenors up to 7 years

Bank credit rating & outlook Fitch upgrades Deutsche Bank and improves outlook of BNP Paribas

Interest Rates & Banks - Market observation per 8 November 2021 -

Trend in the Euro interest rate swap (IRS) curve reverses

  • The Euro interest rate swap (IRS) curve is increasing and steepening again, reversing a period of declines and flattening during summer months. The increasing trend has already started early 2021 and was temporary halted in June ’21
  • During summer, investors expected central banks to announce an interest rate hike before the end of the year. The expectation pushed short-dated yields higher and longer-dated yields lower, flattening the yield curve
  • As per 5 November ’21, the Euro IRS curve decreased slightly yet flattened further compared to October ‘21. Interest swap rates were negative for tenors up to 7 years. It is still too early to tell if the decrease is temporary or will continue during the remainder of Q4 ‘21

Fitch upgrades Deutsche Bank to BBB+, outlook remains positive

  • Fitch ratings has upgraded Deutsche Bank’s long-term issuer default rating (IDR) from BBB flat to BBB+. The outlook on the long-term IDR remains positive
  • The upgrade reflects Deutsche Bank’s strengthened business model, sound asset quality, funding and liquidity. Additionally, Fitch mentions Deutsche Bank’s adequate capitalization
  • Nevertheless, Fitch mentions the ratings continue to reflect weak historical average profitability in line with peers. Fitch expects profitability to improve as the restructuring, which was initiated in 2019, nears completion
  • The positive outlook reflects the potential to further consolidate Deutsche Bank’s market share in the investment bank industry

Fitch revises BNP Paribas’ rating outlook to stable

  • Fitch has revised BNP Paribas’ rating outlook from negative to stable, which reflects the view that downside risk to the bank’s earnings, asset quality and capitalization have diminished
  • The revision is supported by positive macro economic prospects in BNP Paribas’ main markets