2020 back-to-back swap program benchmark statistics: midyear edition
- September 8, 2020
Financial Institutions | Kennett Square, PA
Each year we publish a back-to-back swap benchmark report capturing the previous year’s activity that compares data across years, regions, and bank asset size. Given the unique circumstances of 2020, we are providing a midyear update. Request your copy to gain additional insight.
1. Given recent market dynamics, how are credit spreads over one-month LIBOR changing?
After hitting an eight-year low in January 2020, credit spreads on swapped one-month LIBOR loans increased month-over-month throughout 2020.
2. How are bank-earned swap fees trending?
Not surprisingly, like credit spreads, swap fees have rebounded year to date in 2020. The rebound in fees is noticeable for banks in most asset class categories.
3. Swap volumes were at 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. March 2020 was a high-water mark for swap volumes, with a moderation in volume to pre-August 2019 levels for recent months.
4. What are your expectations for swap volumes for the remainder of 2020?
Historically, the fourth quarter has been a very active season for loan originations. Even with some lingering economic uncertainty related to the ongoing pandemic, there are many positive indications that business activity is coming back to life. The industry is well capitalized and starved for high-quality borrowers, which will provide a strategic competitive advantage to lenders with the capability and capacity to put their best price in the market. Our view into bank pipelines across geographies and industries gives us insight and reason to be optimistic about the remainder of the year, and the opportunities that exist for you.
Back-to-back interest rate swaps explained in 3 minutes
Watch this short video to learn how back-to-back interest rate swaps works.
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Complete the form below to request a copy of the midyear benchmark stats report.
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.20-0347