Banks’ Improved Health Hurts Terms on Notes

Banks that sell U.S. structured notes may be pressed to further increase the complexity and maturities of the securities as their declining credit risk makes it harder to pay attractive returns.

An average of five-year credit-default swap prices for the six largest U.S. banks dropped to a six-year low of 71.8 basis points on Jan. 6. The lower risk of default means banks aren’t willing to pay as high yields on structured notes, which package their debt with derivatives.

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