Fitch updates interest rate stresses criteria with Brazilian IPCA measure

April 08, 2024 (MLN): Fitch Ratings has updated its “Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria” to include rating-case assumptions for exposure to the Brazilian IPCA consumer inflation measure.

The assumptions apply to transactions with IPCA exposure on the asset or liability side, or both.

The assumptions also apply in any cases of combination with fixed-rate coupons and the main CDI reference rate. No ratings are affected as Fitch does not rate IPCA-linked transactions.

At the same time Fitch revised its assumptions for the Australian dollar, Brazilian real and Turkish lira as follows.

Australian dollar: Fitch has lowered the equilibrium rate and the upward and downward plateaus at the ‘B’ rating level by 75 basis points to, respectively, 3.75%, 5.25% and 2.25%.

Brazilian real: We have increased the equilibrium rate by 200 basis points, from 6.50% to 8.50%. We have also increased the upward and downward plateaus at the ‘B’ rating level by, respectively, 150 basis points to 11.50%, and by 250 basis points to 5.50%.

Turkish lira: Fitch has raised the equilibrium rate from 11% to the agency’s near-term forecast of 27.50%.We have increased the upward plateau at the ‘AAA’ rating level to 250% from the previous 35%, in light of the current uncertainty surrounding the surge in consumer inflation and policy responses.

The entity has also increased the upward plateau at the ‘B’ level to 35.75%, from 14%.

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