Daily Commentary BY THE CURVE TEAM –

S&P Affirms Ratings

28th of April, 2021

S&P yesterday affirmed and improved many of their ratings on ADIs.

Notably, the major banks and Macquarie had their negative outlook affirmed. A raft of other ADIs were either affirmed or their outlook was improved.

Bank of Queensland and Bendigo are examples where their outlook was improved from stable to positive. All these updates did not result in any ratings upgrade, only changes in the outlook.

The sovereign (Australian Government) outlook remains the key factor in all of S&P’s updates. S&P in their update stated:

‘The negative outlooks mirror that on Australia and reflect a one-in-three likelihood that we will lower our ratings on these banks in the next two years’

It still suggests the potential for downgrades of ADIs is material. This would pose problems for investors in adhering to policies and potentially create disruptions in financial markets.

S&P did note though that the economic outlook had improved, which was positive for ADIs. They changed their economic risk outlook from negative to stable.

Today, inflation data for Q1 is released. This is a significant update as it will inform the RBA’s decision on Yield Curve Control and QE.

Josh Stewart

Associate - Money Markets