Skip to main content

Author Topic: Changes to Interest Rate and Expected Return

L
  • Posts: 18
Changes to Interest Rate and Expected Return
OP: June 19, 2013, 11:00:00 PM
This week LC adjusted the interest rates on various grades.  I think A is unchanged, some in the B-D range were lowered, but the ones on the "junk" side of the spectrum got higher.  And when purchasing new notes in the D-G range their "expected default" rates are significantly higher.  It has moved my "expected return" numbers offered by LC from around 13% to around 10%, despite the higher rates.  Anyone know how they come up with those numbers and if I should care?
  • IP logged

j
  • Posts: 1
Changes to Interest Rate and Expected Return
#1: June 19, 2013, 11:00:00 PM
Yes, I noticed changes to the expected default rate, but not to the charged interest rates.  It started late 6-18 or early 6-19.  I archive off the browseNotes.csv files and these are the differences I'm seeing in expected default rate:

--Credit Grade-- --Old Expected Default Rate-- --New Expected Default Rate--
A10.750.85
A20.951.05
A31.351.40
A41.551.70
A51.752.00
B12.302.45
B22.82.85
B33.23.3
B43.53.6
B53.73.9
C13.854.25
C24.154.7
C34.45.2
C44.75.7
C54.956.3
D15.36.95
D25.557.6
D35.78.15
D45.98.8
D55.99.4
E16.759.8
E2710.1
E37.3510.25
E47.610.55
F18.2511.4
F28.5111.8
F38.7912.1
F48.912.4
F58.9512.6
G19.6512.8
G29.7512.85
G39.9112.95
G410.113.0
G510.213.05

I'd expect LC to constantly be refining these expected default rates, but the amount of the increase does surprise me. 
  • IP logged

L
  • Posts: 38
Changes to Interest Rate and Expected Return
#2: June 19, 2013, 11:00:00 PM
As long as LC has investors throwing money at them and not enough borrowers, you should expect interest rates on a risk-adjusted basis to continue decreasing.
  • IP logged


R
  • Posts: 484
Changes to Interest Rate and Expected Return
#4: June 19, 2013, 11:00:00 PM
+1 Treasury yields have been screaming upwards. 10Y has gone from 1.68% to 2.42% in less than 8 weeks. 30Y from 2.8% to 3.5% same time frame.
  • IP logged





v
  • Posts: 46
Changes to Interest Rate and Expected Return
#9: June 19, 2013, 11:00:00 PM
Have Lending Club published how they calculate the Expected Default Rate?
  • IP logged

T
  • Posts: 6588
Changes to Interest Rate and Expected Return
#10: June 19, 2013, 11:00:00 PM
Can someone post a link to the lending club yields by note grade?  Having trouble finding it :(
  • IP logged


r
  • *****
  • Hero Member
  • Posts: 568