Syndicated Scoop: What Trump’s Victory Could Mean for Loans, CLOs, The Mortgage Market and More
6 December 2016
Intralinks for Financial Services’ Syndicated Scoop is a newsletter providing a recap of the month’s top stories and insightful commentary related to the commercial and syndicated lending industry. Read on for a quick summary of this month’s most important news items:
- LSTA’s take on what Trump’s presidency may mean for loans and CLOs
- The changing mortgage market: interest rates and regulations
- Morgan Stanley dropping out of R3 Blockchain Group
This Month’s Syndicated Scoop...
The (Loan) World According to Trump
There has been much speculation over what Donald Trump's unexpected election will mean for the loan market – in particular from a regulatory perspective. The Loan Syndications and Trading Association (LSTA) attempts to describe the new reality for loans and CLOs:
“While the landscape for financial reform is more favorable, it is important to note that what swept Donald Trump into office was a populist wave; it remains to be seen whether the president and Congress are willing to go to bat for Wall Street.”
“25 Democrat senators are up for re-election in 2018, 13 of whom are from states that Trump won or nearly won. Their actions may be driven largely by their impact on their chances for re-election; what that means for financial reform is unknown.”
“Although the SEC and the banking agencies are (eventually) likely to be led by people who may be more sympathetic to the markets, many of the recent regulations might be difficult to change in the short term, particularly given that those agencies are mostly staffed by long-term bureaucrats rather than political appointees.”
The Mortgage Market Is Changing Fast
Donald Trump’s recent victory has led to a flurry of concerns in the mortgage market. Interest rates are the most immediate concern. Donald Trump’s victory has led to a surge in bond yields and, in turn, mortgage rates. The quick rise in the 10-year Treasury yield has lenders worried mortgages could become more expensive far sooner than they had anticipated. The second point lenders are considering is whether a more bank-friendly regulatory environment is on the way. In part, that will depend on how the administration approaches any rollback of the Dodd-Frank regulatory overhaul. A looser lending environment would result in conflicting developments: More borrowers would get approved, while raising the risk of more foreclosures to come. Analysts say most lenders would be unlikely to return to practices and products that burned them during the housing crash.
Morgan Stanley Plans to Drop Out of R3 Blockchain Group
Morgan Stanley does not plan to renew its membership in the R3 CEV LLC Blockchain group or invest in a $150 million equity funding round meant to speed the technology’s development. It’s the latest major bank to retreat from R3, which is exploring the use of the Blockchain-distributed database technology in Wall Street infrastructure. The WSJ reported Monday that Goldman Sachs Group Inc. dropped out of R3 when it let its membership lapse and declined to invest equity. Banco Santander SA also recently dropped out, Reuters reported.