Interest Rates & Banks

Euro interest rate swap curve Increase in IRS continues, negative IRS for tenors up to 9 years

Bank credit rating & outlook Outlook of selected banks further improve to positive

Interest Rates & Banks - Market observation per 18 March 2021 -

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

  • In March ’21, the Euro IRS curve steepens and increases 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 5 March ‘21, interest swap rates were negative for tenors up to 9 years
  • The increase of the curve is an indication of increased investor confidence on the back of the COVID-19 vaccine programmes and new US fiscal stimulus

S&P and Fitch have positively changed the outlook of selected banks

  • In Q1 ’21, S&P and Fitch revise the outlook of Deutsche Bank from stable to positive, reflecting the bank’s restructuring progress. The outlook change is supported by the bank’s improving performance and adequate and above-target capitalisation
  • Furthermore, S&P has changed the outlooks of ABN AMRO and Barclays from negative to stable. Rating actions reflect the continued strengthening of the bank’s balance sheet (ABN AMRO) and resilient performance (Barclays)
  • Nevertheless, rating agencies expect that banks’ profitability remains under pressure due to the extended low interest rates and low growth prospects
  • Fitch affirms Commerzbank’s rating at BBB and a negative outlook, yet simultaneously withdraws Commerzbank’s rating for commercial reasons