Commercial Loan Pricing Update (July 2022)

July activity in Q2 PrecisionLender shows volume took a breath from the pace of the past four months and declined approximately 8% month over month. In addition, July saw a 75 bps Fed rate hike, which led to an increase in short-term rate indices joined with a decrease in longer-term market rates during the month—and there are some points of inversion in the term structure. The combination of these forces, events, and outcomes on pricing activity shows borrower costs are rapidly moving higher, as evidenced by: 

  • Convergence of coupon rates across key loan structures, indicating fixed-rate coupons tick downward, while floating rate coupons are sharply higher    
  • A continued increase since May of implied liquidity costs, a component of funding costs 
  • An increase in overall funding costs for floating-rate loans and a slight decrease for fixed-rate loans     
  • No ease to spreads on floating-rate indices to offset the increase in the index itself 

Volume Dips for the First Time Since February  

July 2022 activity, measured by 130 index value, fell short of the prior four-month run rate of 143.

Priced Commercial Volume by Month, Indexed to July 2021=100

Fixed-Rate Coupons Tick Downward and Coupon Rates Converge    

The fixed-rate coupon rate dropped month over month. Funding curve decreases led coupon rates lower in July compared to June by 9 bps. In addition, there is convergence of coupon rates over the past month across structures: What had been a more than 130 bps higher borrowing cost for fixed-rate loans compared to floating-rate SOFR loans in June and prior months is now only 49 bps in July. Floating-rate Prime-based and SOFR-based loans show higher coupons month over month and track increases in underlying indices.    

All structures are responding to changes in index rates (and funding costs), which are captured in the coupon rate. July showed virtually no change in rate type mix compared to June, with floating SOFR structures at 33%, fixed at 32%, and Prime at 15% of activity. Swap structures held at 6%.  

The indicative fixed-rate coupon on SOFR swap structures posted 4.72%—only 21 bps higher than floating-rate SOFR loans. At this time, fixed-rate loans may be more attractive to borrowers.      

Coupon Rate by Month, Rolling Trend

Funding Curve Shows Compressed Range of Rates    

We used two points on the CME Group SOFR curve (one month and 12 month) plus the 60-month point on the composite Federal Home Loan Bank curve to track changes in funding costs during July. These three points capture about 75% of pricing activity.  

Notice the general stable level of 12-month rates moving from 3.11% to 3.06%. Meanwhile, the one-month rate moved upward 60 bps in response to the index hike. In contrast, 60-month rates dropped 36 bps, also in response to the short-term rate hike. From the borrower and relationship manager perspective, July compressed the range of reference rates from 166 bps at the beginning of the month to 77 bps at the end of July. 

Selected Rates—Proxy for Daily Funding Costs, July 2022 


SOFR Spread to Index Expands in July    

Bankers overall expanded spread to SOFR by 6 bps to 2.51%. That can be interpreted as bankers' eagerness to protect profitability and returns. Prime spread to index dropped 4 bps to 27 bps in July. 

 Weighted Average Spread to SOFR

Fee Income Shows Uptick on Floating Rate SOFR Structures While Fixed-Rate Cost of Funds Trends Downward    

Overall, SOFR structures point to increasing borrowing costs. Increased spread to index, increasing fee amounts, and increases in index value put SOFR yields up 79 bps month over month—increase in index plus increase in fees plus increase in spread. It appears that bankers are flexing their “better banking” strength on SOFR structures. 

Fee Income as Percentage of Amount, by Rate Type

While floating-rate funding costs increased, the fixed-rate cost of funds dropped 9 bps month over month. 

Cost of Funds by Month, Rolling Trend 

Implied Liquidity Costs Show Continued Increase Since May  

Q2 PrecisionLender provides a liquidity curve for client information and use as appropriate. We measure the cost of brokered CDs (BCD) across the term structure compared to the interest rate swap curve term structure. The difference between these two measures informs the PrecisionLender liquidity curve. This liquidity curve had shown comparatively little movement until recent Fed rate hikes. Since May, the increase in implied liquidity premium has come from the increase in cost of BCD funds. Liquidity costs contribute to overall borrowing costs. 

Q2 PrecisionLender Liquidity Curve Guidance 

Got Questions?   

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 your questions to 

About the Market Update   

Since March 2020, we’ve posted regular updates on the commercial loan pricing markets based on what we’ve seen when examining the Q2 PrecisionLender dataset. We look at several popular metrics and point out areas in which there have been noteworthy changes.  

Q2 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. 

If you’d like to see our previous loan pricing market updates, you can find them here. If you have questions about metrics that have appeared in previous posts but not this latest one, please reach out to us at

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