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Citigroup Said to Stop Securitizing Prosper's Online Loans

  • Bond investors had demanded higher yields for March offering
  • Bank didn't get discount in buying loans, person familiar says
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Citigroup Inc. is no longer buying debt from Prosper Marketplace Inc.’s platform to package into bonds, halting a key alliance in the growing market for securities backed by online consumer loans.

The decision, disclosed by a person familiar with the situation, comes after investors demanded higher yields in Citigroup’s most recent sale of the securities. The average weighted spread for a batch sold in late March almost doubled to roughly 500 basis points, compared with the previous offering in December, according to a report at the time from loan-data firm PeerIQ.