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Bond Market News
Fitch Warns Of Downgrading US Banks
August 16, 2023
In an interview with CNBC, Fitch analyst Chris Wolfe said that the rating agency could downgrade several US lenders. He added that the banks are feeling the weight of overall tighter oversight proposals as regulators try to plug the gaps post the SVB crisis earlier this year. Fitch’s warning comes just one week after Moody’s downgraded 10 small and mid-sized banks. Fitch initially cut its overall assessment of the banking industry back in June and cautioned another downgrade could trigger a re-evaluation of more than 70 US banks under its purview, including major lenders like JPMorgan Chase and Bank of America. This comes a couple of weeks after the rating agency cut the US sovereign’s credit rating. He added that banks’ fundamentals are also under pressure as increasing interest rates has increased the cost of funds for the banks and weakened the credit demand, squeezing their net interest margin. Shares of US banks fell on Tuesday and a key banking index hit its lowest in a month.
Bonds of US banks traded mostly flat. For instance, Bank of America’s 6.42% 2025s traded at 100.2 cents to the dollar, yielding 5.35%.
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