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Capital Markets Update – Week of February 22, 2021 (audio)

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 Daniel’s 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.

Hi everyone, this is Daniel DeMatos, an Associate on the Capital Markets team at Percent. I would like to thank everyone who is tuning into this week’s capital markets update on Monday, February 22nd. Let’s walk through news and insights that are relevant to credit markets and Percent’s investment platform.

Last week, investors had lots of economic news to digest and it was rather mixed. First, retail sales data came in much stronger than even the high end of economist’s expectations, likely supported by stimulus induced consumer spending. However, in a negative sign for the labor market, new unemployment claims also came in higher than expected. Meanwhile, data on housing starts, permits, and existing home sales, came in broadly in line with expectations last week.

The mixed news may have helped explain market performance which was relatively unexciting in equities, with the S&P 500 falling 1% last week.

In the fixed income markets, the 10-year US Treasury yield finished last week at 1.34% continuing a several months long march higher. This move puts the yield curve at its steepest in 4 years, reflecting at least in part investor anticipation of higher longer term inflation.

In corporate credit markets, we saw a little more tightening in terms of spreads, with IG spreads moving from 92 to 88 basis points while HY spreads gave up a couple points, moving from 323 to 321. In terms of volumes, over $14 billion in high yield bonds and almost $3 billion in leveraged loans priced last week.

The esoteric ABS market continues to be quite active, seeing new deals pricing for Enterprise Rent-A-Car, Monroe Capital, and a shipping container deal for SeaCube. The BBB rated bonds on the SeaCube deal illustrate the strength of market conditions with spreads on that bond coming in a full 125 basis points tighter than a similar deal by the same sponsor in October last year. The much larger single A tranche exhibited tightening of 75 basis points over the same period. The SeaCube deal is backed by a portfolio of shipping container leases.

Moving on to Percent’s Short-Term Note Program and PercentPrime platforms … last week saw a relatively modest net investor inflow.

On the platform, one transaction closed last week:

TSM1 2021-2, a short-term note program note with originator partner The Smarter Merchant for $3,250,000. This 9-month note was an upsized refinancing of the 2021-1 deal by the same originator and priced at a yield of 14.50%, a 50 bp tightening from the last offering with the same originator.

That is all for this week. If interested in receiving the latest news from our investment platforms, please sign-up on our website. Thanks for tuning in to this week’s update and we hope you have a great week! 

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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.

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