July 6, 2020
Fixed-Rate DCPC Pools
- Supply in the secondary market for DCPC product has been light; new issuance in the market from the monthly auction this week should benefit SBAP liquidity.
- The July fixed-rate SBA DCPC auction this week, which includes 10-year, 20-year, and 25-year maturities, is expected to draw strong investor interest as SBA DCPCs and SBICs offer superior convexity profiles to most residential MBS alternatives, while offering comparable yields and spreads.
- Current yield spreads in SBA DCPCs continued the tightening trend last week, tightening 10 bps to 60 bps over Treasurys. Spreads have tightened 25 bps over the last month and are within 1 to 2 bps of year-end and prior year spreads.
June Fixed-Rate DCPC Auction
- The June auction included 20-year and 25-year maturities.
- Borrowers are benefiting from low rates, locking in the lowest debenture rates in the 504 program’s history.
- Total issuance in the monthly auction of $493.7M increased $83.7M (+20.4%) from the prior month, which was the highest level of issuance since March 2013. The 25-year term represented 67% of total issuance.
Floating-Rate 7(a) Pools
- It is critically important to evaluate pools at a wide variety of speeds and using a prepayment vector. Our Performance Profile includes an analysis of your 7(a) pools layered against a historical prepayment vector. Please let your Representative know if you would like to run a Performance Profile.
Paycheck Protection Program (PPP) Extended to August 8th
- President Trump signed into law an extension of the PPP. The legislation extends the June 30 deadline for applying for the program. The new deadline to apply for a PPP loan is August 8, 2020.
- The SBA began accepting new applications July 6, 2020, at 9:00 AM EDT in response to the Paycheck Protection Program Extension Act.
- Through June 30th, $520.63 billion in PPP loans have been approved by the SBA totaling 4.86 million small business loans through 5,459 participating lenders. The average size of PPP loans is $107,199 and the amount of PPP funding remaining is approximately $130 billion.
Dan Stimpson, CPA
Senior Vice President, Investment Strategies
Vining Sparks IBG, LP