In an effort to provide even greater transparency around our offerings and our investment platform, the capital markets team provides weekly updates.
Listen below for Charlie’s most recent views on our short-term note program and the current private credit landscape from Percent’s perspective.
Please find the transcript for this video below.
Hello everyone. This is Charlie Lienau, Director of Capital Markets here at Percent.
Thank you for tuning into this week’s STNP market update for the week ending July 24th, 2020, where we provide news and insights that are relevant to our short-term note program market.
Looking at the broader markets this past week, stocks opened the week on track for another positive week mostly powered by coronavirus-vaccine optimism and momentum from positive economic data from weeks prior. As the week developed, eyes continued to be on Q2 earnings season that is quite unprecedented, with attention to tech-valuations and high concentration risks in some of the major indexes, in addition to rising tensions between the US and China. On Thursday and during Friday’s open we saw a reversal in the positive performance we had for the beginning of the week, as the latest US unemployment data raised renewed concern about the state of the economy, with the DOW ending Thursday’s session down more than 1% along with the S&P 500. The NASDAQ dropped more than 3% as Microsoft and Apple each lost more than 4%. This performance came as the Labor Department stated that about 1.4 million Americans filed for unemployment benefits for the week ending July 18. This ended a streak of 15 straight weeks in which initial claims had been declining. Over the coming weeks, we expect performance to continue to ponder between promising vaccine news and the economic implications of reopening measures that could be rolled back as COVID-19 cases are increasing in most US states, and Republicans and Democrats remain at odds over the extent of the next round of coronavirus aid that should be prepared.
On the fixed-income side, the overall macro story is, of course, the same and as such treasuries were relatively range-bound all week hovering between 0.60% and 0.65% all week on the 10-year treasury.
In risk markets, both IG and high yield spreads continued to tighten all week, as we saw IG corporate index drop ~6bps week-on-week and the HY corporate index drop about ~50bps, to 504, the tightest spread we have seen since early March. This was on the back of weekly issuance of $6.6 bn in the IG markets and $4.7bn in the HY markets.
And finally, on the ABS side, we continue seeing activity across multiple sectors, and we also saw two esoteric deals price in the consumer and marketplace loan space, and one whole business securitization price this week, so definitely continued ongoing appetite for structured credit.
Now zooming into the STNP Market this past week.
Looking at the technicals – In terms of flows, we had positive net inflows for every day this week, adding about $0.7mm in dry powder. We continue to think that the current dry powder relative to the amount outstanding in the STNP Market will be absorbed in the coming weeks, as new programs come online and both old and existing ones continue find attractive sources of capital on our platform.
And in terms of overall demand, we continue attracting greater participation than ever in our Dutch Auctions, which has led to fantastic visibility for originators. Following the highest participation ever by number of investors last week with 9-I with Zinobe, this week has continued with the growing trend with the current live auctions which I will discuss shortly.
This week was a relatively active one for our STNP on the issuance side, with $3.8 million in total pricing across two offerings, with a $2.4 million offering with SALT in 12-D and $1.4 million with Pollen in 3-U. The 12-D offering with SALT is a 3-month note, that closed on Wednesday at 9.25% APY, and represented about a $750k upsize from 12-C at 0bps new issue concession versus the prior note. A fantastic result hitting the ultimate maximum target amount of capital for this rollover. Following this offering, we also closed 3-U with Pollen on Thursday for $1.4 million. As Pollen continues to be the most in demand STNP, we are happy to have been able to open the transaction for some investors who had participated in the Dutch Auction. This 3-month note, callable after 1-month, closed at 9.00% APY, representing a 0% new issue premium from the last note.
In terms of live deals, we have 9-I for Zinobe, which is a rollover of 9-G and 9-H, consolidating these notes into one larger note for $1.24 million. Following the record participation in the auction, we were launch the note at an APY of 14%, representing a minus 1% new issue concession. This transaction was fully subscribed in about 2 days, to existing 9-G and 9-H investors, and new investors who had provided bids in the auction. This transaction is set to close next Wednesday July 29th.
This week, we also released the Dutch Auction for 3 transactions: 2-L with Wall Street Funding, 4-G with Aspiria and 15-D with Cherry. In the first 5 hours of the auction we had already received 90% of indications as in the last auction for each Originator. We will be launching these notes at the final APYs to the platform shortly.
On the new deals front, we will be announcing two new originator partnerships very soon with auctions taking place during the next 2 weeks. We hope investors find these new offerings and originators compelling and, as with everything we do, we welcome any feedback you may have.
For more information on deal timing please access the calendar in our Percent homepage. We also continue providing daily, weekly, and monthly asset performance surveillance reports for 7 different originators on the profile page of the originators, that can be accessed through our website.
Thank you for tuning in. Hope you all have a great weekend.
Nothing in this video should be construed as an offer to sell securities or a solicitation of an offer to buy securities. All investment involves risk and the possibility of loss, including loss of principal, and neither past performance nor forward looking information is a guarantee of future results.