March Capital Markets Update #2

Each month, Percent’s Capital Markets team releases an update that takes a look back at the previous month’s dealflow and highlights the upcoming deal pipeline. Below is Percent’s Short Term Note Program (STNP) monthly market update for March 2021.


Broader Market Commentary

The reported daily new cases and hospitalizations related to COVID-19 have fallen steadily over the course of February from January’s peak, indicating that vaccine and social distancing efforts are showing efficacy across the U.S. and around the globe. Although positive news surrounding vaccine rollouts has strengthened public confidence in the recovery of the U.S. economy, February’s employment report (scheduled to be released on March 5th by the U.S. Bureau of Labor) may provide a clearer picture of current progress. As a reference, the unemployment rate for the month of January was reported to be 6.3%, a 0.4% decrease from the previous month.

While the job market and the broader economy attempt a slow climb back to pre-pandemic levels, the public markets continued to exhibit anomalous behavior in 2021. Both public equity and the fixed income markets experienced higher levels of volatility, with the VIX nearing 30.0 during the final week of February and volatility within the bond market surging to its highest level since April. The NASDAQ and S&P 500 reached record levels this month, closing above 14,000 and 3,900 respectively, before selling off sharply towards the end of February. The selloff within the U.S. equity market was part of a broader selloff across both global equities and fixed income, as investors moved to reduce their bond holdings in fear of an increasing inflation rate. As a result, the 5-year and 10-year leaped up to above 0.8% and 1.5% respectively on February 25th before slightly retracing over the following days.

Fear of rising inflation is at the top of many investors’ minds as the effects of a robust U.S. monetary policy has not yet come to fruition. In terms of fiscal policy actions, the House of Representatives passed a $1.9 trillion COVID-19 relief bill on February 27th; this comes after a string of relief bills passed in 2020 aimed towards aiding the hard-hit labor market. While the Federal Reserve tried to play down the concerns surrounding potential inflationary pressure caused by the massive stimulus payments, household income has increased 13% since February of 2020 and may pose a problem as post-pandemic spending could send the inflation rate considerably higher.

 

SNTP Market Commentary

Percent’s Short Term Note Program (STNP) market (including both retail and prime issuances) continued to expand during the month of February. As of March 1st, a total of $45.7 million of notes were outstanding following $11.9 million of issuance. 

  • STNP issuance since inception stands at $259.5 million, compared to $247.6 million at the time of last month’s update. Issuance spanned 185 individual structured note offerings from 16 originators.
  • STNPs issued in February had a weighted average APY of ~11.25% with average tenors hovering around the 220 days mark.
  • Percent officially returned over $5.3 million in aggregate interest payments since inception to our growing investor base.
  • With no new defaults or losses this past month, we continued to maintain a relatively low default rate of  1.09% since inception.  

During February, we successfully priced 10 offerings across our STNPs to land at $11.9 million, with $10.6 million from our retail platform and $1.3 million related to our prime platform. 

  • We were able to meet or increase target transaction sizes all 10 transactions issued this month. 
  • Offerings ranged widely in terms of tenor and size, from a $3.25 million senior issuance with The Smarter Merchant pricing at 14.50% to a $805,000 2-year note with Lendable for Watu pricing at 11.00%.

Please see below our 2-month historical issuance calendars along with a few charts highlighting STNP market activity since inception for further insight.

 

Historical Issuance

 

STNP Market Activity

Should you have any questions or would like to learn more about Percent, our issuances or the STNP market, please do not hesitate to reach out to us.


Nothing in this post should be construed as an offer to sell securities or a solicitation of an offer to buy securities. All investment involves risk and the possibility of loss, including loss of principal, and neither past performance nor forward-looking information is a guarantee of future results. Any decision to invest must be based solely upon the information set forth in the offering documents, regardless of any information that may have been otherwise furnished, including in this update.

Charlie Lienau
Author
Charlie Lienau
Head of Business Development
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