We help banks, credit unions, and asset managers energize their portfolios and reduce volatility.
- Trade highly sought-after variable-rate government-guaranteed paper
- Offer alternative strategies for clients to capitalize on the SBA/USDA market
- Provide traditional fixed income financial services
from the desk of Joel Banes 6/29/2018
Typically trading activity slows down ahead of summer break, a rate hike, and just prior to quarter end. The month of June, felt like December of 2008. A memory I have tried to erase. SBA pools experienced another increase in prepayment speeds for June as well. Bids on new SBA loans which have remained stable all year, finally took a hit. Well summer blues are here and it’s a BUYERS MARKET!
The coupon on SBA pools adjust to the new prime rate of 5% on July 1st. As such, many SBA pools yield more than a 30 year treasury. Right now the opportunistic investor can stay short, earn more and avoid the interest rate risk associated with fixed rates in a rising rate market. However, it’s not enough just to stay in variable rate securities. One wants to be sure and shop for pools that properly diversify premium risk. We call those pools “Now and Later” pools. Hanover utilizes a generous loan count of medium-sized loans designed to diversify the premium risk per loan most evenly minimizing the impact of any one prepayment and maximizing the marketability “Now” and “Later”. Carpe diem!