MILAN, March 13 (Reuters) – European banks are unlikely to search out themselves compelled to liquidate their bond holdings at a loss like their U.S. peer Silicon Valley Financial institution (SIVBV.UL), Moody’s Traders Service mentioned on Monday.
Although rising rates of interest have hit the worth of banks’ bond portfolios, their market worth will are likely to converge with their nominal worth as they method maturity, below an impact often known as ‘pull-to-par’.
“Based mostly on their sound liquidity and funding profiles, money holdings and secure deposit bases, we take into account massive European banks are usually properly positioned to keep away from the necessity to promote their bonds at a loss,” Moody’s mentioned in a remark.
Moody’s famous {that a} third of European banks’ authorities bond holdings mature inside the subsequent two years, making certain a steady influx of money and decreasing the necessity to promote belongings.
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The company famous that the failures of U.S. banks Silicon Valley Financial institution and Silvergate (SILV.UL) resulted from “a sudden lack of confidence and ensuing excessive money outflows from concentrated deposit bases”.
“Smaller, deposit-funded banks can depend on the steadiness of their loyal depositor bases, which ensures they’ll look ahead to a restoration in bond values with out incurring materially increased funding prices,” it added.
Reporting by Valentina Za, enhancing by Alvise Armellini
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