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, March 22nd. Let’s walk through news and insights that are relevant to credit markets and Percent’s investment platform.
Last week, economic news was relatively negative. Retail sales fell back to earth after a strong January, coming in below even the low end of economists’ expectations. The same was true of industrial production figures. Jobless claims ticked up and housing starts came in a bit light, the latter attributed to cold weather.
In a policy announcement and press release on Wednesday, the Federal Reserve pointed to a strengthening economy but do not expect to lift rates anytime soon. Bond purchases of $120 billion and up continue.
Perhaps the dovish Fed helped support stocks as the S&P 500 finished down by less than 1% despite the rise in Treasury yields and the poor economic news.
In the fixed income markets, another week … another march higher for longer-term Treasuries. The 10-year US Treasury yield ended last week at 1.73% up from 1.63% at the start of the week and 1.34% a month earlier.
In corporate credit markets, we saw a little movement in spreads, with IG spreads moving from 98 to 96 basis points while HY spreads moving a bit in the opposite direction, moving from 326 to 337. In terms of volumes, over $14 billion in high yield bonds and almost $3 billion in leveraged loans priced last week. Junk bond supply this month is already looking like the strongest since 2017 with the month just over half way done. High-Yield funds saw inflows to the tune of $410mm last week and leveraged loan funds saw nearly a $1 billion inflow.
The esoteric ABS market has been seeing good activity, seeing new deals pricing for Foundation Finance, Golub Capital, and Element Fleet Corporation. The Foundation Finance deal was backed by home-improvement installment sales contracts. Spreads on that deal’s AA minus rated senior most bonds came in at 115 basis points, half of their last offering in June 2020. Spreads on the other deals have also meaningfully tightened from their last offerings in 2020.
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 2021-3, a short-term note program note with originator partner The Smarter Merchant for $3,750,000. This 9-month note was an upsized refinancing of the 2021-2 deal by the same originator and priced at a yield of 14.25%, a 25 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.