300bp rate hike, costs would double loss-making entities, report says

Melbourne, Australia, December 8, 2021 / PRNewswire / – After declining for decades, inflation is back. Prices increase, often dramatically, for items such as petroleum, semiconductors and vehicles. Inflationary pressures are prompting some central banks to tighten, increasing funding costs. In a scenario analysis assuming a stress of 300 basis points (bps) of price and interest rate increases, S&P Global Ratings expects the loss-making entity ratio to roughly double.

That’s according to a report released today, titled “How a 300bp Rise in Inflation and Interest Rates Could Hit Borrowers.”

“Our stress scenario for a 300bp interest rate hike only assumes that rates would return to the levels that prevailed before the global financial crisis,” said Terry chan, Principal Investigator at S&P Global Ratings. “Yet we find that this increase would significantly change the financial position of private issuers.”

By region, from China companies are the most sensitive. Globally, cyclical transport, recreation and sports, which have not yet fully recovered from COVID-19, are the most vulnerable sectors.

“Persistent inflation, linked to supply chain disruptions and energy prices, could trigger wage inflation and push the Fed and other central banks to raise rates faster. This could trigger volatility. market, amplified by high debt levels, “said David Tesher, head of S&P Global Ratings North America credit research.

Sovereigns in advanced economies are generally able to absorb a 300bp interest rate hike, but some emerging markets may be stressed. For households, certain geographic and wealth cohorts may be vulnerable to rate hikes.

To quantify the potential effect of a high inflation and interest spread scenario, we stress tested a sample of over 24,000 non-financial companies (91% unrated) for an increase of 300 bp of producer price inflation and for a similar rise in average interest rate spreads. .

If interest rates soar, some cohorts of borrowing households may be more vulnerable than they were in 2008.

This report does not constitute a rating action.

AUSTRALIA

S&P Global Ratings Australia Pty Ltd holds Australian Financial Services License Number 337565 under the Corporations Act 2001. S&P Global Ratings credit ratings and related research are not intended and should not be distributed to any person in Australia other than a wholesale customer (as defined in Chapter 7 of the Legal Persons Act).

S&P Global Ratings is the world’s leading provider of independent credit ratings. Our ratings are essential to drive growth, ensure transparency and help educate market players so they can make confident decisions. We have over one million outstanding credit ratings on government, corporate, financial sector and structured finance entities and securities. We offer an independent view of the market based on a unique combination of a broad perspective and local insight. We provide our opinions and research on relative credit risk; market participants obtain independent information to help support the growth of transparent and liquid debt markets around the world.

S&P Global Ratings is a division of S&P Global (NYSE: SPGI), which provides essential information to individuals, businesses and governments to make confident decisions. For more information, visit www.spglobal.com/ratings.

Update profile:
If you would like to update your information (phone number, email address, company, etc.) or change the industries you receive press releases on, please click here.

Visit SPRatings.com, a free, interactive and informative portal to access highlights of our credit research offerings. Think of this as your prospect portal: www.spratings.com.

Regulatory Affairs and Disclaimer | Privacy and Cookies Policy | Terms of use
Copyright © 2021 by Standard & Poor’s Financial Services LLC. All rights reserved.

No content (including ratings, analysis and credit related data, reviews, model, software or other application or output thereof) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content must not be used for illegal or unauthorized purposes. S&P and any third party vendor, and their directors, officers, shareholders, employees or agents (collectively the S&P Parties) do not warrant the accuracy, completeness, timeliness or availability of the Content. The S&P parties are not responsible for any errors or omissions (negligence or otherwise), whatever the cause, in the results obtained from the use of the content, or the security or maintenance of the data entered by the S&P parties. ‘user. The Content is provided “as is”. THE S&P PARTIES DISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR PURPOSE, NO BUGS, ERRORS OR DEFECTS SOFTWARE, THAT THE CONTENT WILL NOT WORK OR THE CONTENT WILL WORK WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. Under no circumstances will the S&P parties be liable to any party for damages, costs, expenses, legal fees or direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential losses (including, but not limited to limit, loss of income or loss of profits and opportunity costs or losses caused by negligence) in connection with any use of the Content, even if he is aware of the possibility of such damages.

Credit-related and other analyzes, including ratings, and statements in the Content are statements of opinion as of the date on which they are expressed and not statements of fact. S & P’s opinions, analyzes and ratings recognition decisions (described below) do not constitute recommendations to buy, hold or sell securities or make investment decisions, and do not address the adequacy of ‘a title. S&P assumes no obligation to update the Content after posting in any form or format. The Content must not be relied on and does not substitute for the skills, judgment and experience of the user, his management, his employees, his advisers and / or his clients when making decisions. investment and other business decisions. S&P does not act as a trustee or investment advisor, except when registered as such. Although S&P obtains information from sources it believes to be reliable, S&P does not perform an audit and does not assume any due diligence or independent verification obligation on the information it receives. Ratings-related publications may be published for a variety of reasons which are not necessarily dependent on the action of the rating committees, including, but not limited to, the publication of a periodic update of a credit rating. and associated analyzes.

To the extent that regulatory authorities authorize a rating agency to recognize in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to grant, withdraw or suspend such recognition at any time and at its sole discretion. The S&P Parties disclaim any obligation whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage allegedly suffered as a result thereof.

S&P maintains certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective operations. As a result, some S&P business units may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received as part of each analytical process.

S&P may receive compensation for its ratings and certain analyzes, normally from issuers or underwriters of securities or debtors. S&P reserves the right to disseminate its opinions and analyzes. S&P’s public ratings and reviews are available on its websites, www.standardandpoors.com (free), and http://www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed by other means, including through S&P publications and third party redistributors. Additional information on our rating fees is available at www.standardandpoors.com/usratingsfees.

Australia

Ratings are statements of opinion, not statements of fact or recommendations to buy, hold or sell securities or make any other investment decision. S&P Global Ratings Australia Pty Ltd holds Australian Financial Services License Number 337565 under the Corporations Act 2001. S&P Credit Ratings and related research are not intended and should not be distributed to any person in Australia other than a wholesale customer (as defined in Chapter 7 of the Legal Persons Act). Australian users should only access S&P product and service information from www.standardandpoors.com.au. Other S&P websites are not intended for Australian users.

STANDARD & POOR’S, S&P and RATINGSDIRECT are registered trademarks of Standard & Poor’s Financial Services LLC.

To manage your S&P Global Ratings subscription preferences, please click here.

S&P Global Ratings, 55 Water Street, New York, New York State 10041

SOURCE S&P Global Ratings


Source link

Comments are closed.