Financial Markets React to Fed Data and Sovereign Rating Confirmations

By / / Breaking News

Key Takeaways:

  • US bank deposits saw a notable decline, falling by $67 billion to $18.251 trillion last week, according to the latest Federal Reserve H.8 release.
  • Morningstar DBRS reaffirmed the AAA stable trend ratings for the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF), underscoring their robust financial architecture.
  • Switzerland also maintained its AAA stable trend rating from Morningstar DBRS, reflecting its strong economic fundamentals and stable public finances.
  • Portugal's credit rating was confirmed at A (High) with a stable trend by Morningstar DBRS, highlighting its improved fiscal performance and debt reduction efforts.

  • US Bank Deposits Decline Amidst Fed Data Release
    The latest H.8 release from the Federal Reserve indicates a reduction in US bank deposits, which decreased to $18.251 trillion from $18.318 trillion in the prior week, marking a $67 billion drop. This weekly data, providing insights into the Assets and Liabilities of Commercial Banks in the United States, is closely watched by financial analysts for signs of shifts in liquidity and economic activity. The Federal Reserve typically releases this data every Friday.

  • Morningstar DBRS Affirms AAA Ratings for European Stability Mechanisms
    Morningstar DBRS has confirmed the AAA Long-Term Issuer Ratings and R-1 (high) Short-Term Issuer Ratings for both the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF), maintaining a stable trend for all ratings. These confirmations underscore the very strong policy mandate, high capitalization, and effective risk management of the ESM, which acts as a financial backstop for euro area sovereigns. The EFSF's ratings are fully reliant on the unconditional and irrevocable guarantees from its member states.

  • Switzerland Maintains Top-Tier Credit Rating
    The Swiss Confederation has had its AAA Long-Term Foreign and Local Currency – Issuer Ratings confirmed by Morningstar DBRS, with a stable trend. This top-tier rating is supported by Switzerland's wealthy and diversified economy, sound public finances, and strong institutional quality. Despite a challenging external environment and revised down real GDP growth forecasts for 2025 and 2026, Switzerland's prudent fiscal policy and low public debt level (projected at 37.6% of GDP in 2024) provide significant resilience.

  • Portugal's Credit Outlook Remains Strong
    Morningstar DBRS also confirmed the Republic of Portugal's Long-Term Foreign and Local Currency – Issuer Ratings at A (high), with a stable trend. This reflects Portugal's robust fiscal performance, including fiscal surpluses in 2023 and 2024, and a sharp decline in its public debt ratio from 116.1% of GDP in 2019 to 94.9% in 2024. The rating agency expects the public debt ratio to fall below 90.0% of GDP over the next two years, potentially placing it below the eurozone average. Portugal's economic growth is anticipated to outperform the eurozone average over the next two years, driven by healthy real income growth and increased spending from its Recovery and Resilience Plan.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. We are not financial professionals. The authors and/or site operators may hold positions in the companies or assets mentioned. Always do your own research before making financial decisions.
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