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Changes to Interest Rate and Expected Return

Started by Peter, June 26, 2013, 11:00:00 PM

Previous topic - Next topic

Lloigor

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?

joshh

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. 

LonghornSF

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.


Rob L

+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.





viking

Have Lending Club published how they calculate the Expected Default Rate?

TravelingPennies

Can someone post a link to the lending club yields by note grade?  Having trouble finding it https://forum.lendacademy.com/Smileys/default/sad.gif" alt=":(" title="Sad" class="smiley" />





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