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Benchmark stats report
Guide

2020 Back-to-Back Swap Program Benchmark Statistics Report

Date:
January 15, 2021
  • chris funck headshot

    Authors

    Chris Funck

    Director
    Product Management

    Financial Institutions | Kennett Square, PA

Summary

Interested in seeing how your interest rate swap program stacks up relative to your peers? Perhaps your financial institution is not yet using swaps to win more commercial loan business, but would find value in reviewing and analyzing Chatham's Back-to-Back Swap Program Benchmark Statistics Report.

Although 2020 was certainly a challenging year in many respects, back-to-back programs fared well and performed strongly throughout the period. The questions below are those we hear most often from our clients who have back-to-back programs and those institutions considering launching a program. The remainder of the report provides additional details for 1-month LIBOR swap trade statistics and associated loan credit spread trends.

How are bank-earned swap fees trending?

Not surprisingly, swap fees have increased across all asset class categories compared to 2019. Download the report for additional details.

Swap volumes were at a record pace in the last half of 2019 and continued through the early part of 2020. Has the pace changed?

Swap volumes jumped dramatically in late-summer 2019, sustaining higher-than-expected levels into February 2020, with March 2020 a high-water mark for swap volumes. Spring and summer remained healthy relative to long-term growth trends and volumes then increased month-over-month during the last quarter of 2020 with a strong finish in December.

Given recent market dynamics, how are credit spreads over 1-month LIBOR changing?

After hitting an eight-year low in January 2020, credit spreads on swapped 1-month LIBOR loans increased consistently throughout 2020. See the credit spreads section for additional details.

What are your expectations for swap volumes in 2021?

Historically, the first quarter has often been a difficult season to predict for loan originations. Current deal pipelines indicate healthy volume considering continuing current economic uncertainty surrounding the COVID-19 pandemic.

What alternative indices to LIBOR are you seeing develop?

To date, we have not seen traction with alternative reference rates, such as the newer SOFR indices, for back-to-back structures. This is the case for both indicative pricing on deal pipeline structures and for executed transactions. Swap activity on PRIME remains consistent with previous years’ levels.


Regardless of your program status, community and regional financial institutions discover important information within this report on:

  • Average gross fees
  • Average DV01
  • Average transaction volume
  • 1-Month LIBOR trade statistics: term and notional
  • 2020 average credit spreads
  • 3-Year average credit spread trends by geography

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About the author

  • Chris Funck

    Director
    Product Management

    Financial Institutions | Kennett Square, PA

    Chris Funck is the Director of Product Management for Chatham’s Financial Institutions team. In his role he focuses on developing and delivering client-centric products comprised of technology, advisory, and business process outsourcing.

Disclaimers

Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal-notices.

Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved.

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