OREANDA-NEWS. Slowing bank collateral redemptions and no apparent impetus for redemptions to accelerate is likely to temper the rate of future upgrades for U.S. bank TruPS CDOs, according to Fitch Ratings in a new report.

Cost of capital, in contrast to the changes in the regulatory treatment of TruPS in more recent years, will be at the forefront of issuers' decision to redeem early. While almost half of the issuers deferring at the end of 2Q'13 have cured, re-deferrals have picked up most recently. In addition, many re-deferrals took place shortly after issuers cured, which may suggest that some of the re-performing banks have not fully recovered and may need additional time to strengthen their capital base.

Additionally, a relative contribution from excess spread to CDO notes amortization diminished compared to 2014. This trend is expected to continue as more coverage tests come to compliance. Increasing portfolio concentration and expected slowdown in redemptions will temper future bank TruPS CDO upgrades, especially at an investment grade level.

Fitch's report highlights trends and key rating drivers for TruPS CDOs since its performance report from 2013 (highlighted below at the end of the press release). 'Bank TruPS CDOs: Increasing Concentration Moderates Upgrades' is available at 'www.fitchratings.com'.