June 25, 2017 – With limited economic data releases to digest and a quiet week overall, the markets turned their attention to the speeches made by Federal Reserve officials. Vice-Chairman of the Federal Open Market Committee and New York Fed President William Dudley expressed confidence that the tight U.S. labor market will eventually spur higher wages, triggering a rebound in inflation. He also added that this process will likely be gradual, meaning the U.S. economic expansion still has far to go.  Chicago Fed President Charles Evans was far less bullish in his inflation outlook, preaching patience in analyzing the data. In his view, the Fed could wait until December before deciding whether to raise rates for the third time in 2017.  Whether the Fed tightens or not for the remainder of 2017, rates and credit spreads continue to remain near lows of 2017.  

rates & CreditThe chart titled, “Rates and Credit Spreads”, yields, as measured by the US 10-Year Treasury are at their low point for 2017 despite the Fed raising rates three times in the last six months.  Credit spreads as measured by the CDX.IG 5-Year On-the-Run, also remain near the lows of 2017.  Investors seem to have a different view that is contrasting with the Fed’s view.  For Alternative Lenders, this benign environment continues to be helpful for their businesses.  

The capital markets remain active as well for Alternative Lenders.  SoFi Consumer Loan Program (SCLP 2017-4), filed form 15G with the SEC meaning they will soon be in the market with their fourth securitization for 2017.  Kroll Bond Rating Agency, assigned preliminary ratings to three classes of notes worth $322 million to be issued by Marlette (Marlette Funding Trust 2017-2). Classes A, B, C were assigned preliminary ratings of AA, A and, BBB, respectively.  

Opinions expressed within the commentary are general opinions of Chris Lalli and Jae Lim and are not opinions of CapAccel or SF Sentry Securities, Inc. Nothing in this commentary should be viewed as solicitation to buy or sell specific securities or a recommendation to participate in any transactions. Securities offered through SF Sentry Securities, Inc., member FINRA/SIPC.

Sources:  TIAA-CREF, Orchard Platform