How Banks Price Interest Rate Swaps 2026
Understand how an interest rate swap manages interest rate risk. Expert guidance on pricing, break costs, ISDA documentation and MiFID II eligibility from Vuca Treasury
Interest Rate Cap Premiums at 4-year lows: A Strategic Opportunity for Borrowers?
Similar to home or car insurance, Interest Rate Caps provide protection for borrowers against loss in return for the payment of a premium. The good news for borrowers is that Cap premiums are falling. In this article we explore why borrowers should be paying attention Two of the primary factors influencing the cost of Cap […]
Interest Rate Swaps and Caps: Hedging Process
How to hedge interest rate risk When it comes to your business loan, the interest you pay is made up of two parts: the Loan Margin that was agreed upon initially, and a variable interest rate that changes periodically. Interest rate risk arises from fluctuations in the variable rate, which is often based on benchmarks […]
SONIA & EURIBOR can pivot quicker than borrowers can respond
Summary Central Banks in the US (Wednesday), UK and Europe (both Thursday) meet this week All are expected to leave their policy rates unchanged Hedge pricing has improved as markets are pricing in rate cuts for 2024 Central Bank statements and Financial Markets pricing continue to diverge The US Fed, Bank of England and ECB […]
Historical high for Euribor- but for how long?
Summary The ECB has raised its official Depo rate to a historical high of 4.0% This is expected to be the terminal rate but is data dependent The focus has now shifted to how long rates will remain at this level At this stage of the rates cycle, a more nuanced approach to hedging is […]
Echoes of 2008 as Silicon Valley Bank collapse sparks large falls in rates
Summary Silicon Valley Bank collapse was down to mismanagement of interest rate risk Term rates have fallen sharply as risk aversion rises Silicon Valley Bank collapse a canary in the coalmine? Unlike the Financial Crash in 2008, Silicon Valley Bank (SVB) didn’t collapse due to poor lending decisions. Instead, it was simply a conscious decision […]
Euribor 3-month rate set to increase further
Euribor 3 month and Euribor Swap Rates Continue to Climb The European Central Bank (ECB) has raised interest rates by 425 basis points since last summer to 3.75%, the highest level since 2009. The 3-month rate, which influences the pricing of variable rate loans, is at 3.701% – the last time it was at this […]
ECB raises rates again by 0.75%. Another 0.50% expected in December
ECB keeps up the pace with another 0.75% rate hike The ECB held its regular monetary policy meeting today and decided to raise official interest rates by another 0.75%, taking cumulative rate hikes since July to 2.0%. In previous cycles, it took 18 months to tighten policy by this magnitude, making this by some margin […]
ECB raises rates by 0.5% and market forecasts another 1.0% before Christmas
ECB surprises with 0.5% move but more on the way The European Central Bank (ECB) raised interest rates by a larger than expected 0.50% at last Thursday’s policy meeting and also flagged that more rate hikes are also on the way. President Lagarde said after the meeting that rates will keep moving higher as long […]
Inflation rises again while Musk and Dimon warn on outlook
Central Banks grapple with rising inflation and slowing growth Warnings from JP Morgan’s CEO Jamie Dimon that an “economic hurricane” is on the way and from Elon Musk that he has a “super bad” feeling about the economy shine a light on the dilemma faced by central banks attempting to raise interest rates high enough […]