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Author Topic: Higher Interest Rates

s
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Higher Interest Rates
OP: June 28, 2018, 11:00:00 PM
Just got a new e-mail from LC.  This is a bit of good news for those of us who are still investing:

Quote
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Higher Interest Rates
#1: December 31, 1969, 07:00:00 PM
Here's my long time LC interest rate vs time chart updated with today's rate changes.



The dots just help identify the dates on which any interest rates were changed.  From an investor's perspective, this change is overdue.
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T
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Higher Interest Rates
#2: December 31, 1969, 07:00:00 PM
To put this in perspective for investors, here's a chart of LIBOR vs time over roughly the same period.

LIBOR has gone up approximately 2% during this time. 

Has the interest rate on an LC A1 loan gone up 2%?  No.
Has the interest rate on an LC A2 loan gone up 2%?  No.
Has the interest rate on an LC A3 loan gone up 2%?  No.
...
In all cases, not even close. 

You have to get into the C/D/E/F/G loans before you see increases on that order, but there we know that something else big is going on.  The quality of LC loans in the C/D/E/F/G range deteriorated badly in 2015 & 2016, and those interest rate changes were done to compensate for increased default rates. 
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R
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Higher Interest Rates
#3: December 31, 1969, 07:00:00 PM
Wow! Time for me to jump back in   ???
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r
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Higher Interest Rates
#4: December 31, 1969, 07:00:00 PM
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T
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Higher Interest Rates
#5: December 31, 1969, 07:00:00 PM
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T
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Higher Interest Rates
#6: December 31, 1969, 07:00:00 PM
I didn't know you were a bank? From what I recall of when they disclosed the pricing formula years ago, LC pricing is based off of CD rates.  CD rates are a fine proxy for competitive investments to me

https://fred.stlouisfed.org/series/CD12NRNJ

And why haven't CD rates gone up? Well, I suspect the yield curve has something to do with banks hesitation.  And I doubt they'll compete until the money supply starts to shrink.

Basis risk is always a risk in investing in fixed income
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T
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Higher Interest Rates
#7: December 31, 1969, 07:00:00 PM
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T
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Higher Interest Rates
#8: December 31, 1969, 07:00:00 PM
Goldman Sachs increased its rate and joined the 3% / 5 year CD club last Tuesday:
https://www.depositaccounts.com/banks/marcus-goldman-sachs/offers/

There is now a fairly large 3% / 3year CD club. All the large well known names are at 2.55%.

Synchrony Bank increased it's 14mo CD rate to 2.45% on June 19.
https://www.depositaccounts.com/banks/synchrony-bank/offers/

One bank is offering a 2.05% savings account. Goldman Sachs is at 1.80%. The other well known names are at 1.75%.

As individual investors we have to decide for ourselves the additional return we require from holding LC notes when compared to the lower risk alternatives available. For a list of the risks associated with investing in LC notes refer to the prospectus. For projected LC returns, who knows.
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j
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Higher Interest Rates
#9: December 31, 1969, 07:00:00 PM
Really. With my purepoint savings up to 1.9% it's a rather nice place to park money now a days.
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S
  • Posts: 91
Higher Interest Rates
#10: December 31, 1969, 07:00:00 PM
I agree with Fred's insights here 100%. Several banks and credit unions in my area are offering 3.25% CDs/share certificates. Lending Club's interest rate hike is better than a sharp stick in the eye, but it is not enough for me to jump back in. I think I would need a bit higher rate to compensate for the perceived risk I feel at this point in the business cycle and the taxable disadvantage of note charge-offs.
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R
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Higher Interest Rates
#11: December 31, 1969, 07:00:00 PM
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T
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Higher Interest Rates
#12: December 31, 1969, 07:00:00 PM
FYI I'm pulling money out of my LC account as the loans either pay off early or charge off. I am then building a 3 year CD ladder with the proceeds. I'm betting on this beating LC's "solid returns" before and after taxes by a big margin.  >:(
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