SBA Update

November 13, 2017



Portfolio managers focused on adding fixed-rate SBAs, as the DCPC auction was well received by investors.  Activity in the floating-rate SBA sector was limited last week, as portfolio managers continued to review current holdings of SBA floating-rate pools.  In October, the SBA announced a change to the Secondary Market Program relative to the timing of the pass through of amortization excess. Going forward SBA floating-rate prepayment speeds should increase, however not all pools will be impacted equally.  In addition, depositories are looking to the whole loan market, adding USDA government guaranteed loans for fixed-rate exposure.

 

Floating-Rate 7(a) Pools

 

Fixed-Rate (DCPC and SBIC) Pools

Demand for fixed-rate SBA securities continues to be healthy, as portfolio managers shifted their focus to the latest DCPC issue. Last week was the November DCPC auction, which included 10-year and 20-year maturities.  The 10-year maturity had a rate of 2.29%, 27 bps over Treasuries.  The 20-year term was just over $351 million, the fourth largest pool over the past year. The pool is comprised of 478 loans, with a fixed coupon of 2.79%, 45 bps over Treasuries.

 

 

Government Guaranteed Loan Trading

 

Portfolio managers continue to focus on reviewing their SBA floating-rate holdings and adding fixed-rate government guaranteed exposure to their existing portfolios.  Paper from the latest DCPC auction continues to be picked up by investors looking for fixed-rate exposure in their portfolios.

 


Greg Roll, CFA

Senior Vice President

Vining Sparks

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