The two-year personal loan rate from commercial banks obtained from the St. Louis Federal Reserve economic database showed no significant increase in the last year. Meanwhile the two-year US treasury decreased 100 basis points during the measured period.
Because of this, the Spread between the loan rate and the benchmark rate increase by 100 basis points. Although the increase in the last year to 850 basis point is significant it is lower than recent Spread highs of nearly 1100 basis points in May, 2011.
When reviewing the Spread and the US Unemployment Rate, we see a clear trend of the Spread decreasing as the US Unemployment Rate decreases. (Unemployment Rate Axis reversed in the graph below)
Further study using credit bureau data will provide additional insight.
From this high level, we can see commercial bank portfolios are benefiting from lower unemployment rates and higher personal loan spreads.
Disclaimer - This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.