Since early March, we’ve posted regular updates on the commercial loan pricing markets, based on what we’ve seen when examining the PrecisionLender dataset. We look at several popular metrics and point out areas in which there have been noteworthy changes.
Today’s update is for the second half of August. If you’d like to see our previous loan pricing market updates, you can find them here.
We track many more metrics than are spotlighted in these posts. The ones that didn’t “make the cut,” usually don’t get displayed because there’s either a) nothing much new to say about them, or b) the data is too murky and needs a few more weeks of monitoring before it can be shared.
That said, if you have questions about metrics that have appeared in previous posts, but not this latest one, please reach out us at to firstname.lastname@example.org.
NOTE: PrecisionLender’s data reflects actual commercial opportunities priced (loans, deposits, and other fee-based business) by more than 150 banks in the United States, ranging in size from small community banks to top 10 U.S. institutions. In addition to their variance in size, these banks are also geographically diverse, with borrowers in all 50 states.
Volume Continues to Climb After Early July Dip
Loan pricing volume has risen for the third straight period, after a drop in early July and is now back to approximately pre-COVID levels. The two outliers in this chart can be explained by a significant rate drop (March) and the PPP program (April).
The mix of loan types changed slightly during this period, as the fixed rate deal incidence dropped below 40% - down to 37% - while Swaps (8%) and 1-month LIBOR-based floating rate deals (25%) rose.
Priced Commercial Loan Volume, Weekly Average
LIBOR and Prime Spreads Rise
Spreads to LIBOR and Prime both increased in the second half of August – 8 bps for LIBOR and 4 pbs for Prime. They have continued to remain with narrow ranges – 9 basis points for LIBOR and 7 basis points for PRIME – since COVID. This “new normal” is approximately 20-30 bps higher than pre-COVID spreads.
Average Spread to 1-Month LIBOR
Average Spread to Prime
Funding Curves Steepens at 60 Months
It’s a similar story to early August, only with a difference in degree. The short end of the funding curve has stayed consistent since a marked drop in April. But after the 60-month mark, it steepened noticeably in August. At the end of August, the curve at the 10-year mark is 21 bps higher than it was a month earlier – and also 8 bps above April levels. The gap between August and April is now 27 bps at the 20 years and 31 bps at 30 years.
3-Month LIBOR Swap Curve
Fixed-Rate Coupons Fall
Curiously, the coupon rate on fixed-rate deals feel by 10 bps, despite the aforementioned rise in funding costs. We don’t have a clear explanation for this, but we will continue monitoring to see if this is an anomaly or the start of a trend.
Meanwhile, LIBOR- and Prime-based coupons rose in the second half of August, which reflects the increase in spreads to index that we noted earlier.
Coupon Rate by Month
Fixed-Rate NIM Reverses Recent Trend
A Look at Adjustable Rates
Adjustable Rate NIM
Adjustable Rate Spreads
Adjustable Rate Spread to Prime
Liquidity Contracted During August