July 2, 2017 – As proxy, central banker gatherings in resort towns sometimes serve as pivotal moments for the capital markets. For years, the annual Jackson Hole gathering in August provided the setting for big news: Raghuram Rajan’s 2005 unheeded warning about financial system risk and Ben Bernanke’s 2010 tip to QE2 (Quantitative Easing). This year, the ECB meeting in the Portuguese resort town of Sintra has upstaged the US Fed’s meeting in Jackson Hole. In his remarks, ECB President Mario Draghi sounded optimistic and spoke of “prudence” in withdrawing stimulus. The Bank of England’s Mark Carney said, “some removal of monetary stimulus is likely to become necessary” if Brexit worries lessen. US Fed Vice Chair Stanley Fischer worried about financial stability rather than low inflation. Taken together the monetary authorities were more hawkish than expected. Ten-year government bond yields in the U.S., U.K., and Germany shot higher by 10-25 basis points in reaction to all the combined statements from central bank leaders. As market participants have been calling for and expecting rates to rise for the past few years but haven’t, will we look back on this as a pivotal week in 2017 for global rates? Economic data, labor and inflation levels in particular, will drive rates in the long term.
All that said, the capital markets have remained friendly for Alternative Lenders executing term financing of their loans via securitization transactions. College Ave, an online student loan refinancing and origination company, closed its first securitization for $160.89 million. DBRS assigned the notes A-1, A-2, B, C ratings of A, A, BBB, and BB respectively. SoFi Consumer Loan Program priced $500 million of notes in a two tranche deal where S&P, DBRS and Kroll rated the tranches AA and A respectively. This is SoFi’s 4th securitization of consumer loans in 2017 and 7th overall. Additionally, Kroll upgraded SoFi’s class A notes from A to AA in their SOFI 2016-1 deal issued over a year ago due to less than expected losses.
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: Payden & Rygel, Orchard Platform