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.
The market has become less volatile in the past few weeks, and as a result we’ve decided to change the frequency of our updates. They’ll come less often (twice a month) but will cover more ground in each post. Today’s update is for the second half of June. 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 Remains Steady
Pricing volume was steady throughout the month of June. It was slightly above May, well above April, and similar to January and February. The further we get from the frenetic activity of March, the most it seems volume levels have stabilized.
Average Weekly Priced Commercial Loan Volume
LIBOR Spreads Dropped While Prime Spreads Rose
LIBOR spreads dropped 17 bps in the second half of June, from their YTD peak earlier this month. Meanwhile Prime spreads jumped up markedly, rising 17 bps in the second half of June, to their highest levels this year.
Average Weekly Spread to 1-Month LIBOR
Average Weekly Spread to Prime
Those shifts in spread translated into the coupon rates we observed in the second half of June. The rate drop for LIBOR deals (16 bps) nearly matched the drop in spread over LIBOR (17 bps) during that period. The same was true with the rise in Prime deal rates (17 bps) and the spread of Prime (17 bps).
Coupon Rates by Month, YTD
Floor Incidence Rises
We’ve fielded numerous questions from bankers recently about what we’re seeing with the incidence of floors. Digging into the numbers, we found that the percentage of loans with floors has risen from approximately 30% earlier this year to nearly 50% in June. That’s resulted in a similar shift in the dollar amount of loans with floors. It’s risen from approximately 25% in Jan./Feb. to nearly 50% in June.
Floor Incidence by Month, YTD
DDA volume, a good proxy for liquidity, has risen steadily since early April, but did dip in the last two weeks of June, after reaching its peak the week of June 11-15.
As we mentioned in our previous post, PPP funding was likely a significant factor in the rise in DDA volume. We’ll continue monitoring this metric to see if the last two weeks of data are an indication that the PPP effect has now diminished.
DDA Volume by Week
Our banking consultants and data scientists are combing through PrecisionLender pricing data every day. If there’s anything you’d like to know about what they’re seeing, please send along your questions to email@example.com.