Interest Rates & Banks – Market observations per 30 June 2023 –

The Euro interest rate swap (IRS) curve remained an entirely inverted curve

• Since Mar ‘23 the Swap curve has shifted upwards by 50 bps for maturities of 1 year, 40 bps for maturities of 2 and 3 years, 30 bps for maturities of 4 years, 20 bps for maturities of 5 and 6 years and between 5 and 10 bps for maturities of 7 to 10 years.
• The ECB AAA curve has shifted upwards for all maturities, with 80 bps for maturities of 1 and 2 years, between 50 and 60 bps for maturities of 3 to 5 years and between 20 and 40 bps for maturities longer than 5 years.

Interest rate swap spread lowered overall

• The spread between the swap curve and ECB AAA bonds converges to approximately 75 bps when borrowing for 2 - 4 years. Spreads fall to 14 bps for the longest tenors (closer to the long-term average).

In Q1 2023 several credit ratings are revised upwards

• Moody’s revises Bank of America upwards from A2 to A1. The upgrade follows strong sales and trading revenues and the seventh consecutive quarter of positive operating leverage.
• S&P revises Commerzbank upwards from BBB+ to A-. The upgrade reflects the expectation Commerzbank will reach its 2024 financial targets.
• S&P revises Barclays upwards from BBB to BBB+. The upgrade reflects the expectation that the group's earnings will be higher, more diversified and more sustainable than before, while asset risk will remain broadly stable, and capital and liquidity will remain strong.