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Weekly Industry Update: Equity Market Volatility, GS Dialing Up M&A

By Vy Phan

February 12, 2018

Volatility made an abrupt return to capital markets after a nearly 18 month hiatus. Equity markets dropped almost 10% from their peaks, as investors focused on rising US treasury yields. 10-year yields touched 2.88% - nearly a four-year high. Corporate bonds (CDX.IG spreads) widened 5bps this week to 60bps, while high-yield widened 16bps to 353bps. No ABS deals have priced during the sell-off. Investors are waiting to see if this sell-off materially affects new issue pricing. Secondary trading in securitized products remains orderly. US consumer credit grew by $18.4 Bn in December 2017, at an annualized growth rate of 7.7%. Revolving credit card debt increased by $5.1 Bn to $1.03 Tn, the highest on record. Consumer spending has boosted US GDP, although the increasing cost of leverage and rising rates could create a drag on growth. In regulatory news, the OCC chief Joseph Otting commended the CFPB on reconsidering its payday lending rules and deferring action on additional regulations. We analyzed the CFPB’s new direction here. Also, the CFPB has put the Equifax data breach probe on ice, state attorney generals are picking up the enforcement burden with Equifax facing 240 lawsuits. Bloomberg's Julie Verhage reports that Goldman Sachs is close to buying personal finance startup Clarity. Clarity is a personal financial management software that uses AI to help individuals make better financing decisions. GS Marcus has ramped up its acquisitions over the last year as it rounds out its online consumer banking offering. Goldman’s previous acquisitions were mostly acqui-hires, but the purchase of Clarity would spark a bid and higher valuations for lenders and other originators due the scarcity of technology supply. Separately, GS also announced that it is in talks with Apple to finance iPhone purchases. Below is a timeline of GS Marcus’ acquisitions. GS M&A Accelerating Source: PeerIQ This week, we summarize the 3 MPL securitizations this year – two from SoFi and one from Marlette. Overall, we see larger deal sizes and strong investor demand. Source: KBRA, Moody’s We look forward to seeing everyone at SFIG’s ABS Vegas where we’ll dive into more of these trends on the Marketplace Lending Snapshot panel. Conferences: PeerIQ in the News: Industry Update: Lighter fare: