SBA Update

February 12, 2018



As we have observed over the past few weeks, activity in the SBA market continues to be squarely centered on fixed-rate DCPC structures and purchases of USDA loans on the secondary market.  Last week investors added DCPCs from the February auction.  Although floating-rate SBAs continue to trade, the majority activity is in par handle floating-rate issues.  Four months of SBA floating-rate prepayment activity have passed, giving the market a better understanding of the new cash flow distribution methodology and the market impacts.

 

Floating-Rate 7(a) Pools

 

Fixed-Rate (DCPC and SBIC) Pools

 

 

Government Guaranteed Loan Trading

 

Although fixed-rate loan originations that back DCPC debentures has tailed off since last year, the latest DCPC auction was larger than the previous two pools.  Going forward, strong demand should continue if supply is limited due to lower fixed-rate origination activity.  In addition to DCPCs, depositories have been very active purchasing USDA loans for their balance sheets.

 


Greg Roll, CFA

Senior Vice President

Vining Sparks

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