As rates rose, KeyBank unwound 94% of pay-fixed swaps

Sale of AFS hedges left book exposed throughout late 2022, much as at ill-fated SVB

Ohio-based KeyBank – the main subsidiary of KeyCorp – unwound virtually all the pay-fixed interest rate swaps in its banking book in 2022, mirroring Silicon Valley Bank’s moves in the months prior to its collapse.

As rates began their ascent last year, forward-starting swaps originally meant to hedge a portfolio of commercial mortgage-backed securities, gained in value. This prompted the bank to unwind them early with the aim of crystallising gains, executives said on an earnings call that

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