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 analysis is for the second half of October. The theme of this update – a generalized steadiness in most of the metrics we track.
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 Rises Slightly; General Range Emerges
Pricing volume rose a bit in the second half of October, but the weekly average for the month overall was a bit below September levels. Volume has been largely steady since May and resembles the levels seen before the onset of the pandemic. March (when rates dropped dramatically) and April (when PPP deals soaked up most of the oxygen in the room) look more and more like anomalies with each passing month.
Priced Commercial Loan Volume, Weekly Average
Rate Type Mix Remains Steady
In keeping with the aforementioned “steadiness” theme, we checked in on the mix of rate types for the first time in several months just to confirm that the story here remains the same – little has changed in the mix.
Mix by Rate Type
LIBOR and Prime Spreads Drop but Remain in Higher Range
Spreads to both 1-month LIBOR and Prime took a bit of a dip during this period – 8 basis points for LIBOR and 4 for Prime. But as noted before, the long-term trend shows clearly through some short-term choppiness: Spreads are up approximately 25 bps above pre-COVID levels.
The further January and February recede into the rearview mirror, the more these spread levels look like the new state of things and not just a reaction to the initial impact of the pandemic.
Coupon Rates Move in Opposite Directions for Fixed- and Floating-Rate Deals
The coupon rates for floating 1-month LIBOR and Prime deals both fell – by 8 bps and 4 bps, respectively. Those drops mirrored the decreases in spread to both indices. That drop, coupled with the the steadiness in COF, resulted in a NIM decrease of 6 bps for floating rate deals.
Meanwhile, the coupon rate for fixed-rate deals bumped up slightly this period after remaining largely unchanged since the start of September. Higher COF (more on that in a bit) was the reason for the shift – thus margins on fixed-rate deals were largely unchanged from the previous period.
Coupon Rate by Month, YTD Trend
3-Month LIBOR Swap Curve Steepens
The short-end of the 3-month LIBOR swap curve has remained largely unchanged in recent months – leading to steady funding costs for floating rate deals.
But at the 36-month mark, the curve steepened when comparing the Oct. 30 snapshot with its Sept. 30 counterpart. The 4 basis-point gap between Oct. 30 and Sept. 30 at the 36-month mark widened to 8 bps at 60 months and 13 at 120 months.
3-Month LIBOR Swap Curve
Comparing Funding Curves
With the mandated switch away from LIBOR looming in the not-too-distant future, we’ve gotten many inquiries from bankers recently about other potential funding sources. Below is a comparison of the Treasury, 3-month LIBOR Swap and FHLB funding curves. FHLB is the steepest of the curves, followed by Treasury, and then LIBOR Swap.
Curve Comparisons – Oct. 30 Snapshot
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.