Upgrade will help Chicago navigate a thornier bond market

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202210251432SM______BNDBUYER_00000184-0fdf-d34d-a3d7-5fff818a0000_110.1&utm_source=Wirepoints+Newsletter&utm_campaign=845146e7cd-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_895ee9abf9-845146e7cd-30506353#new_tab


Last week’s Fitch Ratings upgrade of Chicago offers dual benefits for Mayor Lori Lightfoot’s administration as it pursues passage of a proposed 2023 budget and preps a general obligation issue.

Fitch’s Friday upgrade to BBB from BBB-minus, the city’s first from Fitch in 12 years, and the potential for more good rating news could help sell the City Council on supplemental pension contributions and other pieces of the budget plan viewed favorably by analysts.

The Fitch action and an overall rosier view of the city’s fiscal condition should also broaden the investor appeal of an upcoming $757 million general obligation issue in a more fickle and tumultuous market than prevailed in the city’s last GO offering in late 2021.

Author(s): Yvette Shields

Publication Date: 25 Oct 2022

Publication Site: Fidelity Fixed Income

Pension Withdrawals Drain Savings in Chile and Peru

Link: https://www.fitchratings.com/research/sovereigns/pension-withdrawals-drain-savings-in-chile-peru-01-06-2022


Peru, Chile and Bolivia have allowed early withdrawals from their funds as a source of relief for households and to support recoveries during the pandemic and the global price shock. But these have had negative financial and confidence ramifications, contributing to downgrades of Peru in 2021 and Chile in 2020. Longstanding private pension funds have been important supports for sovereign creditworthiness where they exist in Latin America.


Peru’s Congress approved a sixth withdrawal from private pension funds in May. Prior rounds due to the pandemic led to withdrawals of USD17.8 billion or 8% of 2021 GDP. In Chile, a fourth withdrawal proposal failed in April 2022, but Chileans have already withdrawn about USD50 billion (16% of 2021 GDP) in 2020-2021. Bolivia allowed early withdrawals once in 2021 for more limited amounts (0.4% of 2021 GDP).

Publication Date: 1 June 2022

Publication Site: Fitch Ratings

US CMBS Loan Defaults Leveled Off in 2021 with Pandemic Recovery

Link: https://www.fitchratings.com/research/structured-finance/us-cmbs-loan-defaults-leveled-off-in-2021-with-pandemic-recovery-17-05-2022



US CMBS loan defaults declined significantly in 2021 compared with 2020, as the resumption of economic activity supported a recovery in asset performance and property cash flows from their pandemic lows, says Fitch Ratings in its US CMBS 2021 Loan Default Study. The total annual default rate for Fitch-rated CMBS transactions declined to 0.4% in 2021, down from 3.3% in 2020.

Author(s): Stephanie Duski, Melissa Che, Everett Bruer, Sarah Repucci

Publication Date: 17 May 2022

Publication Site: Fitch Ratings

Sovereign Defaults Hit Record in 2020; More Are Possible

Link: https://www.fitchratings.com/research/sovereigns/sovereign-defaults-hit-record-in-2020-more-are-possible-08-06-2021



The sovereign issuer-based default rate rose to a record high in 2020 against a backdrop of weakened sovereign credit profiles due to the Covid-19 pandemic, Fitch Ratings says. Downgrade pressures have eased this year, but our ratings indicate that more defaults are possible.

Fitch’s recent Sovereign 2020 Transition and Default Study shows that five Fitch-rated sovereigns defaulted in 2020, up from only one in the previous year. As a result, the sovereign default rate rose more than threefold to 4.2% from 0.9% in 2019. The previous high was 1.8% in both 2016 and 2017.

Publication Date: 8 June 2021

Publication Site: Fitch Ratings

Tax Rules Shape U.S. Life COVID-19 Impact: Fitch Analysts

Link: https://www.thinkadvisor.com/2021/04/21/tax-rules-shape-u-s-life-covid-19-impact-fitch-analysts/


At big life reinsurers, U.S. claims have averaged about $5 million to about $25 million per 10,000 COVID-19  deaths reported for the entire  U.S. population, according to the analysts.

RGA could be facing $15 million to $25 million in claims per 10,000 U.S. population  COVID-19 deaths, the analysts estimate.

Even at RGA, however, 2020 COVID-19 claims amounted to only about 6% of net premiums earned, and all of the life reinsurers were profitable in 2020, the analysts say.

Author(s): Allison Bell

Publication Date: 21 April 2021

Publication Site: Think Advisor

Life and Health Reinsurers Only Moderately Affected by Coronavirus Pandemic

Link: https://www.fitchratings.com/research/insurance/life-health-reinsurers-only-moderately-affected-by-coronavirus-pandemic-19-04-2021


Despite more than 2.8 million coronavirus pandemic-related deaths globally so far, the world’s five largest life and health (L&H) reinsurers – Hannover Rueck SE, Munich Reinsurance Company, Reinsurance Group of America, Incorporated, SCOR SE and Swiss Reinsurance Company Ltd – have only been moderately affected by heightened mortality losses and remained profitable in 2020. Fitch Ratings expects pandemic-related mortality claims to decline in 2021 due to the global rollout of vaccines. This assumes that virus variants will not diminish the effectiveness of the vaccines. L&H Reinsurers Remained Profitable in 2020The five largest L&H reinsurers reported declines in net earnings in 2020 from 2019 due to pandemic-related mortality claims. However, they remained profitable despite the high number of deaths globally.The key reason for this is the very low penetration rate of mortality covers amongst the older age cohorts globally, with very few exceptions such as the US, Canada or the UK. People aged 75 or higher have been most affected by the pandemic.Mortality Claims Will Decline in 2021Fitch believes that the global rollout of vaccines will prove successful, leading to a lower number of deaths linked to the pandemic in 2021 and 2022, and bases its credit analysis on this assumption. Virus variants pose the largest risk to this scenario as they may render vaccines less powerful or even useless.

Publication Date: 19 April 2021

Publication Site: Fitch Ratings