Monday, June 29, 2015

The SBA and cowabunga



interjection: An expression of surprise, joy, or enthusiasm.

The word was the cry of Chief Thunderthud, a character in the children's television program Howdy Doody. The word was later adopted by surfers. It was popularized by its use on the animated show Teenage Mutant Ninja Turtles.

Cowbunga!  The SBA will be closed on Friday, July 3rd in observance of Independence Day.

That means it should be a holiday for everyone else.


SBA LIBOR Base Rate June 2015 = 3.18%
SBA Fixed Base Rate June 2015 = 5.16%
SBA 504 Loan Debenture Rate for June

The debenture rate is only 2.98% but note rate is 3.03% and the effective yield is 5.062%.   


The Bureau of Labor Statistics is probably also yelling out cowabunga as they too are taking Friday, July 3rd off.

As a result, their report on jobs for the month of June will come out on Thursday, July 2nd.

Last month’s report showed that the U.S. economy gained 280,000 jobs in May.  That was the best month so far this year.  March was the worst month of job growth, but the Labor Department revised up March's job gains from 85,000 to 119,000.  April's job gains were revised down slightly to 221,000.

A few weeks later, the Federal Reserve met and they didn’t exactly yell out cowabunga.

Federal Reserve policymakers are coming around to the bond market's wisdom about where interest rates are headed.

Futures traders have been signaling for more than a year that when the Fed begins raising target rates for the first time since 2006, the increases won't be fast or reach the levels central bank officials predicted. For the second time this year, the Fed's policymakers lowered their rate projections in official forecasts.  Officials reduced their median estimate for the funds rate at the end of 2016 to 1.625 percent, from 1.875 percent in their March forecast, and to 2.875 percent for the end of 2017, down from 3.125 percent in March.

Eurodollar futures settle at a three- month lending rate that has averaged about 22 basis points more than the Fed's target over the past 10 years.

Here is a summary of what the market expects for Eurodollar futures based upon the pit-traded prices at the Chicago Mercantile Exchange:

DEC15- 0.56
DEC16- 1.42
DEC17- 2.12
DEC18- 2.60
DEC19- 2.97
DEC20- 3.25

What does all this mean?

I don’t know.

Eurodollar futures currently imply a federal funds rate that really is not going to be moving up all that much any time soon.

The Federal Reserve affects our lives in many ways.  Not only do they call the shots on interest rates, more importantly, they are the official arbitrator of holidays.   
For July 3rd, they declared that the Board of Governors would be closed.   Like all Federal Reserve pronouncements, the devil is in the details.  They go on say that while the Board of Governors get that day off, for holidays falling on Saturday, Federal Reserve Banks and Branches will be open the preceding Friday.  Had the Fourth of July fallen on a Sunday, all Federal Reserve Banks and Branches would be closed the following Monday.
As a result, there is some confusion as to whether or not July 3rd is a holiday.  According to the U.S. OFFICE OF PERSONNEL MANAGEMENT, for most Federal employees, Friday, July 3, will be treated as a holiday for pay and leave purposes

Most banks will be open on Friday, July 3rd.  Here is a handy dandy guide as to who is open and who is closed:

I will be taking the day off.  Cowabunga!

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