Deck of the Week, w/e Feb. 18
Focus on the Rate Cycle
The U.S. producer price index rose 1 per cent in January— the biggest gain in eight months, well above the 0.4 per cent rise registered in the previous period and double what economists had forecast . The large monthly gain translated to an annual increase of 9.7 per cent, in line with December’s surge.?Mortgage refinance volumes in the U.S. continue to freefall down 16.5%, pushing refi share to 43%, the lowest since July 2019. Upward pressure on home prices pushed the average loan amount up another $6,400.
Focus on Pandemic Hangover
Multiple positive actions in the US MLP and Industrial space on faster than expected deleveraging (Targa Resources Corp's IDR Upgraded to 'BBB-'; Outlook Stable , Boardwalk's IDR Upgraded to 'BBB'/Stable from 'BBB-'; Senior Unsecured Noted Assigned 'BBB' , Eaton Corp's Outlook Revised to Stable; IDR Affirmed at 'BBB+' )
We expect a significant reduction in the overall US CMBS loan delinquency rate this year, improving to 1.25% by YE 2022 from 2.70% in January 2022. This is lower than the 1.31% delinquency rate at the onset of the pandemic and well below the pandemic peak of 4.98%.
USPF looked at Illinois’ recently released executive budget , arguing that the state is inching towards a return to the state’s pre-pandemic rating. Fitch revised the Outlook to Positive on IL IDR and related ratings (‘BBB-‘) in 2021, signaling a reversal of the April 2020 one-notch downgrade.
U.S. airports have rebounded throughout the months of 2021, and reached an average recovery of 81% through the end of September 2021 (compared to the same period in 2019), in line with Fitch’s rating case expectation of 80% recovery for the period.
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Focus on New Things
Our excellent primer on decentralised finance (DeFI) expects many providers to submit to regulation to support their market credibility, but some may look to operate outside rules-based ecosystems so that they can be more innovative. The FSB have weighed in on crypto and are particularly concerned at the prospect of a Global Stablecoin, and the risks this could pose to especially emerging market capital flows.?
Focus on the Unexpected
A potentially very sharp downgrade in prospect for Spanish electricity tariff securitization notes, normally a stable asset class, placed on RWN at ‘Asf’ on a possible principal shortfall (of €21k), driven by ‘unbudgeted transaction expenses’.?
FitchWire Highlights This Week (14 – 18 FEB)