By the Numbers

A primer on Ginnie Mae Project Loans

| October 13, 2023

This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors.

Ginnie Mae project loan securities make up one of the cornerstones of the agency CMBS market. Fannie Mae and Freddie Mac multifamily programs issue primarily bullet-like securities from loans call-protected by defeasance or yield maintenance provisions. But in the Ginnie Mae project loan (GNPL) market, dealers aggregate collateral call-protected by declining prepayment penalties and structure multifamily agency CMOs heavily tailored to investor preferences. The full faith and credit guarantee means investors face no credit risk, so project loan securities have regulatory and financing advantages equivalent to their Treasury security brethren. The difference in call protection requires a more nuanced analytical approach, similar to that of agency MBS, when evaluating pricing and performance.

This primer provides an overview of the GNPL market in a few sections:

  • A brief history – founding of FHA, Ginnie Mae and the project loan market
  • Originators
  • Collateral – loan types, pool types, call protection and guaranty
  • REMICs and deal structures
  • Pricing and performance – prepayment and default vectors, loan assumptions and modifications
  • Regulatory and financing advantages – risk weights, capital ratios, liquidity coverage ratios and repo

A brief history

The Federal Housing Authority (FHA) was created by Congress in 1934 to resuscitate mortgage lending, the housing market and new home construction, which had all but collapsed in the wake of the Great Depression. The FHA provides mortgage insurance on single-family, multifamily, manufactured home and hospital loans made by their network of FHA- approved lenders to protect them from borrower default.

The Government National Mortgage Association (GNMA), or Ginnie Mae, was split off from Fannie Mae as a separate corporation in 1968, to create a secondary market for all government-insured or government-guaranteed mortgage loans. Ginnie Mae, a wholly owned U.S. government corporation, provides a full faith and credit guaranty for timely payment of principal and interest. But selling individual loans on the secondary market was still extremely difficult. In 1970, Ginnie Mae developed the first mortgage-backed security (MBS), which pooled loans to serve as collateral for a security that could be sold on the secondary market. And the rest, as they say, is history: this vastly broadened the market of mortgage loan investors; provided liquidity to lenders, mostly banks, who otherwise had to retain the mortgages in their portfolio; and increased the flow of credit to single-family and multifamily borrowers.

Ginnie Mae project loans (GNPL) are those for multifamily commercial real estate properties, including nursing homes, assisted-living facilities, hospitals and manufactured housing. The loans can finance stabilized properties, or new construction or renovations that convert to stabilized loans upon completion. Investors benefit from substantial call protection in the form of prepayment lockouts and penalties.

Project loan pools are occasionally traded on their own, but the vast majority are put into REMICs and structured into collateralized mortgage obligation (CMO) securities. The government insurance and Ginnie Mae guaranty make the bonds as credit-risk free as Treasury securities. Analysis of prepayments and defaults is still crucial to project potential returns and evaluate investment strategies. The guaranty also results in favorable capital treatment when calculating both risk-based capital and Basel III’s liquidity coverage ratio ( LCR), and favorable financing terms in repo markets.


Project loans are originated and underwritten by a large and very diverse network of HUD-approved private lenders, according to FHA statutory requirements. The top 6 originators and the unpaid principal balance (UPB) currently outstanding for each originator are listed in Exhibit 1. These originators include Berkadia, Walker & Dunlop, KeyBank, JLL Real Estate Capital, PNC Bank and Regions Bank. The ten largest originators have comprised ∼62% of the market.

Exhibit 1: Top originators and UPB outstanding

Note: Data as of October 2023.
Source: Bloomberg, Santander US Capital Markets


FHA Loan Types

The FHA insures two basic types of loans:

  1. project loans, which are used to fund purchases and refinances of properties; and
  2. construction loans, which fund new construction or substantial rehabilitations.

The construction plan and term are approved by the FHA, and the construction loan converts into an FHA-insured mortgage when construction is complete and the project receives final endorsement by the FHA. At that time Ginnie Mae will automatically convert a construction loan pool into a project loan pool. The typical construction period ranges from 10–20 months.


Project loans and construction loans are pooled separately. Ginnie Mae offers seven different pool types. Market participants typically refer to project loan pools as “PLCs” (project loan certificates), and construction loan pools as “CLCs” (construction loan certificates).

All construction loans and most project loans are pooled individually, one loan per pool, although a couple of pool types can accommodate more than one loan. The latter are small loans that would not make sense to pool individually. All pools are issued under the Ginnie I program.

Project Loans and Pools

Project loans are used to fund the purchase or refinance of eligible multifamily properties, and fund ownership after the completion of construction under a construction loan. Loans are fixed rate and typically amortize over a 35-year term.

Exhibit 2: Types of project loan pools

Note: Complete pool criteria are available in Ginnie Mae MBS Guide, Chapter 31, Project Loan Pools – Special Requirements.
Source: Ginnie Mae, Santander US Capital Markets

There are five different types of project loan pools (Exhibit 2). The most common pool types are PN by far, followed by LM. PL production has declined such that there are very few of those pools remaining, as the last one was issued in February 2008. PL pools amortize with a level payment, while PN pools have some non-standard schedule that must be detailed in the prospectus supplement. For example, there could be a balloon payment, or a graduated payment, or the loan could be subject to an accelerated payment due to a tax abatement. LM pools can contain level or non-level payment loans. All three of these pool types must have the gross coupon between 25 and 50 bp of the net WAC (weighted average coupon), implying a servicing fee of 12–37 bp, since Ginnie Mae’s guaranty fee (g-fee) is 13 bp. However, pools backed by a USDA rural development loan (LS) are permitted to have a wider spread, and Ginnie Mae can authorize exceptions.

Loans >24 months seasoned must be placed in LM pools. These pools historically contained modified loans, but more recently have been used for refinance loans as well. These refinances are processed through the HUD’s “IRR” (interest rate reduction) program introduced in April 2013. The IRR operates like a rate-only modification to lower the note rate on the loan. Loans are required to be current and must not have been in default within the last 24 months. Call protection is enforced—loans cannot be within any lockout period and must pay any prepayment premiums due. Since these loans are not new loans they are likely >24 months seasoned and ineligible for other pool types. LM pools will therefore generally have maturities shorter than the typical 35 years.

LS and RX pools can have more than one loan per pool, and the minimum servicing fee is 37 bp. LS pools can have a minimum $100,000 loan size, while other pool types have a $250,000 minimum.  LS and RX pool types are relatively rare.

Construction Loans and Pools

Construction loans are used to fund either new construction or the substantial rehabilitation of an existing property. The loans carry a 40-year term, and do not amortize during the construction period. The loan behaves like a line of credit during this period, in that the borrower can draw against the loan amount and interest is only paid on the drawn amount.  Those draws are not allocated to existing owners of the pool; instead, the total pool balance increases and the issuer needs to market and sell the additional balance of the pool. The pool balance can never exceed the drawn amount.  At the end of the construction period the loan converts into a project loan upon final endorsement by the FHA.

Exhibit 3: Types of construction loan pools

Note: Complete pool criteria are available in Ginnie Mae MBS Guide, Chapter 32, Construction Loan Pools – Special Requirements.
Source: Ginnie Mae, Santander US Capital Markets

There are two types of construction loan pools (Exhibit 3). The vast majority of construction pools have been, and are, CLs, where the interest rate remains the same when the construction loan converts to a project loan.

When a construction loan pool is issued, the issuer reserves two consecutive pool numbers. The lower pool number is used for the construction pool and the higher pool number is reserved for the eventual project pool.

Construction pools pay only interest on the outstanding balance until the conversion to a project loan; principal is only paid in these cases:

  • In the event of default, when the FHA’s insurance claim is paid.
  • If the final project loan is not approved.
  • If the pool matures before construction is completed.
  • At conversion, if the FHA insures the project loan for an amount below the current balance on the construction loan, the difference is prepaid pro-rata to the construction pool investors.

Construction pools can have a maturity ranging from 200% of the FHA’s estimate of the construction time (at the low end) up to the expected maturity date of the permanent loan. The initial maturity of a construction loan certificate (CLC) is the expected conversion date to a permanent loan certificate (PLC). If the project experiences delays, the maturity date of any CLC can be extended upon consent of the contracted security purchaser. Once a CLC is placed in a REMIC, the security purchaser waives their right to deny extensions to the maturity date and the Ginnie Mae issuer holds sole discretion. The failure of a CLC to convert into a PLC prior to its maturity date (adjusted for any previously granted extensions), for any reason, will result in the full payment of the principal balance of the CLC on its maturity date.

The gross coupon on the loan must be between 25 bp and 50 bp more than the net coupon on the pool. This implies 12 bp minimum servicing and 37 bp maximum servicing.

Call Protection

Construction and project loans are typically protected by a prepayment lockout period followed by a prepayment penalty period. The typical loan has 10 years total prepayment protection (lockout + penalty). The prepayment penalty is typically 1 point per year of remaining term. For example, a loan with a 2 year lockout and 8 year penalty would face 8 points of penalty in year 3, 7 points in year 4, …, and 1 point in year 10.

The origination trend has been towards shorter lockout periods and longer penalty periods. For example, in 2000, the most common structure was a 5/5 (lockout years/penalty years). But over the last few years the most common structures were 0/10, 1/9, and 2/8.

Pool holders benefit from call protection, as the disincentive to prepay creates more stable cashflows, and in the event of a prepayment the premium paid by the borrower is passed through to the investor.


Like all Ginnie Mae bonds, these pools are backed by the full faith and credit of the United States government. The structure is similar to the single family setup, with loan losses insured by the FHA, and Ginnie Mae guaranteeing timely payment of principal and interest. The issuer is responsible for remitting timely interest and principal to the pool in the event a borrower defaults; Ginnie Mae only steps in when the issuer fails to do so. Mortgagors pay mortgage insurance to the FHA, and a 13 bp guaranty fee to Ginnie Mae.

REMICs and Deal Structure

Both construction and permanent project loans can be traded in their pass-through certificate form, as CLCs and PLCs. These are usually held and traded by dealers as they accumulate collateral for a securitization, though some investors buy pools in pass-through form. The majority of project loan pools are put into real estate mortgage investment conduits, or REMIC deals. Using a REMIC structure to aggregate multiple pools offers a significant advantage of diversifying across various pool characteristics, like geography and HUD insurance program, and reducing the exposure to defaults on an individual property. Using a REMIC also permits a better match to investor needs via time tranching. Diversification and structuring both act to increase liquidity in the market.

A typical project loan REMIC deal includes 40 to 100+ loans, and can include both project and construction loans. Deal size can range from $75 million to as much as $1.2 billion; average deal size over the past decade has been $275 million, which increased to about $350 million in the heaviest origination years during the pandemic (Exhibit 4).

Exhibit 4: Ginnie Mae project loan origination

Note: Data through October 2023.
Source: Bloomberg, Santander US Capital Markets

There is no canonical structure for a project loan deal, because they are tailored to suit investor demand, and interest in particular class and coupon cuts can change over time. But as a template, dealers often include some or all of the following class types and cashflow features in a GNPL REMIC deal:

  • The A classes – One or more front sequentials with average lives ranging from 2.5 years to 5 years. The A’s receive principal first, in a pro rata fashion, based on the total collateral allocated to the sequential strip it leads.
  • The intermediate M (or H, or other letter) classes – The next sequentials after the leading A’s are paid down, with average lives ranging from 8 to 11 years. These classes accrue and pay coupon interest until principal is fully paid down.
  • A last cash flow (LCF) B class – The last sequential class with an average life of 20+ years. This class accrues and pays coupon interest until principal is fully paid down.
  • A Z class – The Z, or zero coupon bond, is similar to the B in that it is the last class to have its principal paid down, but the Z does not pay interest in the interim. The principal balance of Z accretes the coupon interest due until it is the current payer in the waterfall, so it’s UPB grows over time. The interest payment due is directed to other class(es) to pay down their principal faster.
  • An interest only (IO) class – These bonds have no principal payments, but receive a slice of the coupon interest, typically from 50 bp to 150 bp, of the entire pool. They also receive 100% of the prepayment penalties collected by the trustee. Prepayment penalties are not guaranteed by Ginnie Mae, and involuntary defaults are not subject to penalties.

Deals are also occasionally structured with pass-thru classes, multiple LCF classes across collateral strips, or other structural variations that a dealer chooses to make to satisfy investor preferences. The lettering of tranches is not by definition, and can vary somewhat from dealer to dealer, though A , B, Z and IO classes are fairly standardized. The offering documents for a particular deal review the complete structure and paydown information.

One example deal structure is shown in Exhibit 5. This deal contains two collateral strips which receive principal pro rata. The percent of unpaid principal balance (UPB) of the deal allocated at origination to each class is shown, as well as the percent UPB of the collateral strip that the class comprises.

Exhibit 5: Example deal structure

Note: This is a stylized example of a GNPL deal. Class tranching, principal allocation and coupon cuts vary tremendously across deals. Last cash flow or Z tranche will typically receive all principal after intermediate classes are paid down.
Source: Santander US Capital Markets

Market Size

The project loan program has grown substantially over the past two decades. Annual production of pools and REMICs since January 2000 is shown in Exhibit 6. In the early 2000s through the housing crisis, GNPL deal production averaged about 6 billion per year. The market roughly tripled in size during the 2010s, averaging about 18 billion per year. Multifamily originations surged during the pandemic, boosting both agency and non-agency CMBS production. The project loan deal peak was in 2021 with 45 billion of issuance.

The number of dealers involved in project loan REMICs has grown along with the size of the market, from 6 active dealers in 2009 to 16 active dealers by 2023. There is currently about 140 billion of unpaid principal balance (UPB) outstanding across about 45,000 pools in GNPL securities.

Exhibit 6: Ginnie Mae project loan annual REMIC production

Note: Data thru June 2023.
Source: Bloomberg, Santander US Capital Markets

Monthly issuance averaged $250 million in project loan pools through the 1990s, then began to ramp up in the early 2000s. Issuance peaked at over $5 billion in March of 2021, and has since retreated to about $1.5 billion per month through the first half of 2023. The increase in modified loan pool issuance (LM, green) is primarily a result of the interest rate reduction program, which began in 2013 (Exhibit 7). This is a streamlined refinance option for GNPL borrowers.

Exhibit 7: Ginnie Mae project loan issuance (monthly, by pool type)

Note: The primary pool types are PN, which is a standard, non-level payment project loan; CL which is a construction loan; and LM which is a modified loan. PLs are a level payment loan, with the most recent PL pool issued in February 2008. Data is monthly, through 8/2023.
Source: Ginnie Mae, Intex, Santander US Capital Markets

Pricing and Performance

Project loans exhibit both prepayments and defaults. Ginnie Mae’s guarantee ensures that defaults are passed through as prepayments, but there are still reasons to analyze defaults and prepayments independently:

  • Defaults can occur during the lockout period.
  • Prepayment penalties are not paid on defaults.

Two standard curves have been developed to address project loan prepayments and defaults:

  • The project loan default (PLD) curve, and
  • A 15% constant prepayment rate (CPR) curve that integrates the project loan default curve (CPJ).

Both curves have become the market convention used in pricing Ginnie Mae project loan (GNPL) securities, though investors routinely adapt the curves to evaluate performance across different prepayment speed and default scenarios over time.

Project Loan Default (PLD) Curve and Defaults

Defaults are important because, while all principal is returned, no prepayment penalties are paid by the borrower, so they are not paid to the investor. These are also commonly referred to as involuntary prepayments. Only involuntary prepayments can occur during the lockout period.

Defaults are usually assumed to follow the project loan default (PLD) curve, which is a simple seasoning ramp—CPR given WALA (weighted average loan age)—developed by Donaldson, Lufkin, and Jenrette (Exhibit 8).

Exhibit 8: PLD curve versus empirical rates and a static approximation

Source: Ginnie Mae, Santander US Capital Markets

The PLD curve was based on historical default rates experienced by project loans through the late 1990s. The PLD curve is still used as a baseline, but default rates have declined substantially since the curve was developed. Empirical default rates since 2004 are also plotted on Exhibit 8. This shows that defaults are now actually lowest in the early years of the mortgage, then climb gradually over time. Defaults typically rise when the mortgage hits a balloon payment, exits the interest only period and begins to amortize down, or at final maturity.

A PSA ramp is used to adjust the PLD curve to reflect different default rates. One method is to calculate the average involuntary prepayment rate for each vintage, expressed as a percentage of the PLD curve for each year of loan age (Exhibit 9). Default rates tend to vary considerably over time, with the highest recent default rates occurring for the 2007 – 2009 vintages most heavily impacted by the housing crisis.

Exhibit 9: Prepayment speeds by year since issuance as % of PLD curve

Note: Involuntary prepayment rates change over time and across vintages. Data through year-end 2020.
Source: Ginnie Mae, Santander US Capital Markets

Instead of using a vector, a static 30% of the PLD curve, or 30 PSA is often used as a reasonable proxy for the ramp. It modestly overestimates default rates in the first 3 years of the loan, then underestimates them slightly in years 6 through maturity,  but it’s not a bad approximation.

Project loan defaults are driven by the usual multi-family default drivers—declining property values, increasing vacancy rates, etc. Defaults can be the result of an actual claim made to the FHA or the result of a loan modification or override. A loan modification is negotiated with the lender while an override is negotiated directly with HUD.

The servicer has the option to buyout when the FHA makes their initial claim payment, but doesn’t have to buyout until the FHA makes their final claim payment. For rural development loans, the option to buyout is effective when the USDA provides their first estimate of the final claim amount.  Modifications and overrides also trigger a buyout. The FHA also can approve a forbearance, at the servicer’s discretion. In this case the loan remains in the pool, but the servicer is required to fund any P&I due to the pool that the mortgagor is no longer paying.

Finally, construction loans tend to exhibit higher default rates than project loans as there is less certainty about the viability of the project.

CPJ Vectors and Prepayments

Project loans can, and do, voluntarily prepay their loans once they are past their lockout period. Borrowers might refinance in order to take advantage of a better interest rate, take out equity from a property that has appreciated in value, or sell the property. While project loans often carry a prepayment penalty for many years, since the penalty does not increase as rates decrease it is possible for project loans to be pushed in-the-money to refi even after paying the penalty.

Prepayment speeds are typically quoted in terms of “CPJ,” and 15 CPJ is a typical market pricing speed. The CPJ vector is a combination of a constant 15 CPR plus 100% of the PLD curve. The CPR vector assumes only involuntary defaults can occur during a lockout period. For example, 15 CPJ is defined as:

15 CPJ ≡ {  during lockout: PLD

after lockout: PLD + 15 CPR  }

The market convention at issuance is typically to quote GNPL securities prices and projected yields based on prepayment speed of 15 CPJ. This is roughly the average lifetime speed for very seasoned vintages (Exhibit 10). Again, investors can also use the historical average CPR speed vector over time (at the bottom of the table) as opposed to a static lifetime CPR, or a vector / speed assumptions based on their own projections depending on the prevailing interest rate environment.

Exhibit 10: Prepayment speeds across vintages (voluntary + involuntary)

Note: Data as of September 2023.
Source: Ginnie Mae, Santander US Capital Markets

The S-curves show the refi responsiveness of project loans versus converted construction loans (Exhibit 11). Converted construction loans tend to prepay at slightly faster speeds across most refi incentive buckets, including those that are out-of-the-money to refinance.

Exhibit 11: S-curves for project loans vs converted construction loans

Note: Data since 2020. Slower speeds for higher refinance incentives reflect burnout for very seasoned loans.
Source: Intex, Ginnie Mae, Santander US Capital Markets

Construction loans often carry a higher gross WAC (∼50 bp) than comparable project loans. Assuming unchanged rates, once construction is completed the converted project loan would already be ∼50 bp above the rate on a new loan, and therefore would be that much closer to becoming in-the-money to refinance. The borrower would need to wait until the end of the prepayment lockout period, but a number of loans are now originated without a hard lockout. So a converted construction loan might exhibit worse convexity than a loan on an existing project, but also are somewhat more likely to prepay despite high penalties still attached.

Loan Assumptions and Modifications

Project loans are assumable, which means that a new borrower, subject to HUD approval, can take on the obligations of the old loan. In a sell-off, the value of the existing loan, which is locked into a low rate, appreciates. Sellers will be more aggressive about negotiating an assumption with a buyer to capture some of that value, which will slow speeds in a sell-off.

Loan assumptions occur when there is a change in property ownership and a new borrower takes over a loan. This is called a Transfer of Physical Assets (TPA) and, for FHA-insured loans, requires approval by the US Department of Housing and Urban Development (HUD). Loan assumptions and prepayments both result in terminations of the original FHA insurance policy. Even though loan assumptions do not result in a prepayment, the new borrower must be approved for an insurance policy and the previous policy is extinguished when the loan is assumed.

Based on strictly financial considerations, loan assumptions, which result in the assignment of a loan to a new borrower, should be more attractive when the loan has a lower coupon than the current mortgage rate. When interest rates rise and loans are deep out-of-the-money to refinance, assignments should increase. Prepayments and loan modifications due to interest rate reductions should to the reverse: increase when interest rates fall and loans are in-the-money to refinance, and decline in periods of rising rates. This has historically roughly been the case (Exhibit 12).

Exhibit 12: Prepayments, modifications and assignments in GNPL

Note: A modification of a GNPL pool results in a prepayment. The modified loan is then reissued as an LM pool and can be put into a new deal. Data is monthly, through 12/2022.
Source: FHA, Ginnie Mae, Intex, Santander US Capital Markets

Since the late 1990s, the number of loan assignments has been relatively low compared to prepayments and modifications. GNPL assumptions peaked at 75 loans during one month in 1991 and have mostly declined ever since despite an enormous surge in issuance. For the past decade assumptions have been rare, averaging one or two per month while the program has grown to 44,000 loans outstanding. For a complete analysis of loan assumptions, please see Loan assumptions likely to remain sparse in GNPLs.

Regulatory and Financing

Regulatory advantages for bank investors

This full faith and credit guaranty has given Ginnie Mae securities—multi-family and single-family alike—favorable capital treatment under both bank leverage ratio and liquidity coverage ratio (LCR) rules.

Bank investment portfolios tend to maintain an overweight in explicitly government guaranteed securities over those with greater credit risk or lower liquidity. This is due to regulatory requirements governing bank leverage ratios and liquidity coverage ratios.

  1. Tier 1 capital ratio – Ginnie Mae securities, both multi-family and single-family, qualify as a 0% risk-weighted asset for banks, like Treasury securities. For comparison, Government Sponsored Enterprise (GSE) securities, like those issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBs) have a 20% risk weighting.

Banks don’t have to hold any capital against Treasury or Ginnie Mae securities for the purpose of Tier 1 capital requirements, because they are explicitly US government guaranteed and considered credit risk free. The 0% risk weight means those assets do not contribute to the sum of risk weighted assets in the denominator of the Tier 1 capital ratio.

Tier 1 capital requirements vary by size of the bank and how much of a buffer the bank decides to hold above the required minimum. Most US banks tend to have a Tier 1 leverage ratio target of between 9% and 15%.

Comprehensive information on US bank capital requirements and calculation of risk-weighted assets can be found in the FDIC’s Manual of Examination Policies, Section 2.

  1. Liquidity coverage ratio – Ginnie Mae and Treasury securities also are categorized as High Quality Liquid Assets (HQLA) Level 1, when determining the Liquidity Coverage Ratio. GSE securities are HQLA Level 2.

There are no limitations on Level 1 assets, or haircuts applied to their market values when totaling the stock of HQLA. Level 2 assets cannot account for more than 40% of total HQLA, and their amounts are subject to a 15% (Level 2A) or 50% (Level 2B) haircut.

For LCR purposes, banks are credited the full market value for Ginnie Mae and Treasury securities, compared to haircuts and limitations on holdings of GSE and other qualifying securities. Liquidity is assumed to be achieved either through sales or borrowing against the collateral (repo). The low haircuts and preferable financing terms on Ginnie Mae project loans is consistent with other Ginnie Mae securities.

Systemically important financial institutions (SIFIs) are required to maintain an LCR >= 100%.

Financing advantages for levered investors

Ginnie Mae securities – both single-family and multi-family – are credit risk free thanks to their US government guaranty. One consequence is that they can be financed with the same minimal haircuts and comparatively low repo rates that are available to Treasury securities. Treasuries are typically subject to a 2% haircut, meaning investors can lever up as much as 50-to-1. The same amount of leverage is available for portfolios of Ginnie Mae securities. The lowest financing rates for general collateral are secured overnight financing rates (SOFR) or term SOFR rates. These rates apply to Treasuries and Ginnie Mae securities held in tri-party repo.

Mary Beth Fisher, PhD
1 (646) 776-7872

This material is intended only for institutional investors and does not carry all of the independence and disclosure standards of retail debt research reports. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.

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