Key facts
- US regional banks entered the first quarter expecting interest rate cuts.
- Hedging strategies across several US banks favored receive-fixed swaps.
- Regions Bank reported $22.8 billion in receive-fixed swaps notional on loans.
- KeyCorp and Citizens Bank were noted for their significant receive-fixed swaps portfolios.
US banks entered the first quarter with hedging strategies tilted towards receive-fixed swaps, indicating an expectation of declining interest rates. This positioning suggests these banks anticipate that the value of their hedging portfolios will increase if rates fall, aligning with potential Federal Reserve rate cuts.
Regions Bank, for instance, disclosed holding $22.8 billion in receive-fixed swaps notional on loans, contrasted with $4.4 billion in pay-fixed swaps. KeyCorp and Citizens Bank were also identified as leading institutions that have heavily utilized receive-fixed swaps as part of their hedging approach.