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 July. 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 Rebounds Slightly
After a dip in early July, pricing volume rose slightly in the second half of the month. But it remains below May and June levels, as well as pre-pandemic levels.
Average Weekly Priced Commercial Loan Volume
LIBOR Spreads Drop, Prime Spreads Stay Steady
After reaching a YTD peak earlier in July, LIBOR spreads dropped by 11 basis points (bps) in the second half of the month to 2.55%. During the pandemic LIBOR spreads have been more volatile than Prime spreads, which have stayed in a 6-basis point range for the past four months and is currently at 48 bps.
Average Spread To 1-Month LIBOR
Fixed and Floating Coupon Rates Move in Opposite Directions (Again)
This headline is the same as the one we used for the first half of July – but now the story is completely different.
In early July fixed rate coupons had fallen, while the coupon rate on 1-month LIBOR deals had gone up 6 basis points. For this most recent period, fixed-rate coupons went up 8 basis points, while the aforementioned drop in LIBOR spreads accounts for the 11-basis point drop in the coupon rate for LIBOR deals. Again, the steadiness of Prime spreads is reflected in the coupon rate for Prime deals, which has moved little over the past four months.
Coupon Rates by Month, YTD
Funding Curves Dropped Again
For the second straight month, funding curves have dropped. The May, June, and July marks for the 3-Month LIBOR Swap curve start off tightly bunched at 1-month but steadily spread apart from there, with more than 15 basis points separating the May and July marks for 10-year (120-month) deals.
The drop has been even more significant on the FHLB Composite curve, which has a 21-basis point drop since May at the 10-year mark.
3-Month LIBOR Swap Curve
Fixed Rate NIM Continues Pandemic Expansion
That drop in funding costs, along with the aforementioned rise in the coupon rates and a 7-point uptick in yield, combined to push the NIM on fixed-rate deals to its highest levels since the start of the pandemic – 44 basis points above April levels.
Fixed Rate NIM Composition
Floating Rate NIM Falls Back to June Levels
A drop in LIBOR spreads, a drop in floating rate coupons, a drop in yield and little to no change in COF all added up to a 12 bps drop in floating rate NIM in the second half July. The number – 3.05% – is now more in line with June and May NIM levels, but still well above April.
Floating Rate NIM Composition
Our banking consultants and data scientists are combing through PrecisionLender pricing data every day. If there is anything you’d like to know about what they’re seeing, please send along your questions to email@example.com.