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Post by bracknellboy on Feb 20, 2014 21:53:32 GMT
I get the sense that the balance of money vs. loans is tipping back again, just looking at how current listings are filling. e.g. C- £150k 40% filled within 5 hours of listing.
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blender
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Post by blender on Feb 20, 2014 22:53:42 GMT
Hi BracknellBoy,
What you say about the primary market may be right, though marginal rates are still very high on the large loans and there are just 79 auctions listed at present.
If we talk about liquidity, as in your title, then strictly we are talking about the secondary market and the ease which which we can sell loan parts without making a loss (other than fees). And on the secondary market things have been getting slightly worse through the week. I have been monitoring the number of unsold loan parts at 0% or a discount through the week as an inverse proxy for the liquidity of our portfolios and will give some results at the end of it. But at present there are over 6200 such loan parts and for the last few days there seems to be no daily pattern of reduction in the afternoons, such as there was on Monday when it was 3150 at 6pm.
It would be tempting to suggest that the bulk of the early money of the new loans, which is mostly Autobid, might be at the expense of liquidity on the secondary market. I had thought that Autobid favoured new loans in the morning, when the repayments are made, and then gave some releif to the secondary market later in the day. There has not been any significant daily pattern in unsold parts at par since Tuesday, just a slight overall increase from day to day.
I am pretty sure that FC will have some lever which alters the Autobid balance between the primary and secondary markets - in fact they should have and I would be worried if they did not. It may be that the improvement you detect in fill of primary loans is at the expense of liquidity, with the lever pulled towards the primary market for much of the time. This is all supposition and just one possible interpretation of the figures. But it does seem that FC's offers to borrowers and introducers have been more successful than those for lenders, and that is an imbalance which still needs to be corrected with more new lender cash.
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Post by bracknellboy on Feb 21, 2014 9:59:03 GMT
Hi BracknellBoy, What you say about the primary market may be right, though marginal rates are still very high on the large loans and there are just 79 auctions listed at present. If we talk about liquidity, as in your title, then strictly we are talking about the secondary market and the ease which which we can sell loan parts without making a loss (other than fees). I accept your correction on my poor use. However when TC sponsor's are prepared on this board to talk about "Pricing for liquidity not risk" when they are talking about balance of lender funds vs. borrower requests I'll take the view that I am in reasonable company in my lazy usage.
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blender
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Post by blender on Feb 21, 2014 11:59:05 GMT
I am no expert and was not intending to criticise your usage of liquidity, BracknellBoy, just to extend your interesting observation into the balance between the primary and secondary market. In any case you did not use liquidity in your post, so there is nothing to criticise. It is my use of liquidity in the context of your thread title that I was hoping to define.
I found that 'pricing to liquidity' TC discussion confusing. Again strictly and sticking to FC, if the interest rate that a lender offers at auction is determined by what he or she can subsequently sell rather than the risk in the loan then that would be bidding to liquidity rather than risk (and is what flippers do). That discussion on TC was concerned with a perceived going rate for loans of around 10% and the fact that such a perception was more effective in determining bidding behaviour rather than the interest rate justified by the risk attached to loans. The model is different and pricing to liquidity could refer to adjusting the offer rate from a rate determined by risk to a rate at which people will buy the loan. The application of that discussion to the FC model is beyond me.
Anyway, the main issue for me is whether any improvement in the availablilty of cash for the primary market (5046 just closed seems to support that) is done at the expense of liquidity through the secondary market.
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Post by aloanatlast on Feb 21, 2014 13:28:21 GMT
The autobidder will now be chucking every penny it can into that loan, subject to its constraints, because it's programmed to try to balance the percentages.
So in general it will favour today's loans over yesterday's, until they catch up, and large loans over small ones, and anything that's lagging behind.
If I were an Autobid user, I'd want it to buy me a random sample, like a sort of index tracker - not something programmed to soak up the  that manual bidders don't want.
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Post by yorkshireman on Feb 21, 2014 14:23:54 GMT
"the that manual bidders don't want." An apposite description considering the junk that’s being offered as investment grade: negative net assets, 100 days + to settle invoices and so on and that’s just A rated firms.
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blender
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Post by blender on Feb 21, 2014 15:52:39 GMT
"the that manual bidders don't want." An apposite description considering the junk that’s being offered as investment grade: negative net assets, 100 days + to settle invoices and so on and that’s just A rated firms. And sometimes negative net worth when you strip out the intangible assets. Ballast is another word for the autobid money at MBR which we see shovelled into each loan. Like ballast poured into an empty ship to keep it afloat on its voyage.
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Post by GSV3MIaC on Feb 21, 2014 17:09:46 GMT
Not forgetting the main use of autobid - to soak up the cr&p that manual bidders accidentally bought and now want rid of! Frankly (non dynamic) autobid is the only think that makes FC work.
But yep, the secondary market is awash with parts at 0% and even 0.1% and 0.2% (which must also be considered dumping, albeit not into autobid pits). Afaict there's absolutely nothing recent you can't buy cheaper on the secondary market than you would have done at even AVERAGE auction rate, never mind autobid MBR.
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that manual bidders don't want.
