July 10, 2017
Trading in both SBA floating-rate and fixed-rate investments was light last week as the second quarter came to a close and managers focused on closing the books in a holiday shortened week. The July DCPC auction was met with soft demand as the market absorbed both 10-year and 20-year debentures. Loan trading activity was limited last week, as depositories focused on closing out the quarter.
Floating-Rate 7(a) Pools
- Recent activity has been elevated in both shorter WAM equipment-backed floating-rate pools and the longer real-estate-backed offerings. Investor bias continues to be in equipment-backed pools offering shorter cash flow structures than the longer real-estate-backed pools. Recently issued equipment-backed pools traded at prices between 112 – 114, with yields around 1.80% at a 10 CPR.
- Floating-rate pool coupons reflect the increase in Prime as of July 1st.
Fixed-Rate (DCPC and SBIC) Pools
- Demand for fixed-rate SBA securities was limited last week, although portfolio managers added DCPCs from the July auction. The 20-year term was just over $305 million, with a fixed coupon of 2.98%, 60 bps over Treasuries. The 10-year term was just under $14 million, with a fixed coupon of 2.32%, 37 bps over Treasuries.
Government Guaranteed Loan Trading
- Loan trading activity was limited last week as mangers focused on closing out the 2nd Activity should remain limited in the near term, however with the recent issuance of new floating-rate pools, demand for new loans is expected to increase.
Trading in both SBA floating-rate and fixed-rate investments was light last week, however activity levels should return to pre-holiday levels in the near term. Floating-rate pool coupons reflect the increase in Prime as of July 1st.
Greg Roll, CFA
Senior Vice President