oppugn
uh-PYOON
To call in
question; to contradict; to dispute.
From Latin
oppugnare (to fight or oppose), from ob- (against) + pugnare (to fight), from
pugnus (fist).
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TIP OF THE WEEK
TIP OF THE WEEK
Nobody is
oppugning SBA loans as SBA 7(a) loan approvals have more than DOUBLED on an
annualized basis since 2009.
With just over a
month left in the SBA fiscal year, SBA 7(a) loan approvals have already set all
time records.
This bodes well
for the economy as SBA 7(a) loan production has been prescient.
The correlation of
SBA 7(a) loan approvals with our nation's economic performance appears to be
quite strong. Just for fun I calculated the correlation coefficient between SBA
7(a) loan volume and GDP for over six years using the Microsoft CORREL function.
It came out to a statistically significant 0.86.
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Indices:
Indices:
PRIME
RATE= 3.25%
SBA
LIBOR Base Rate August 2015 = 3.19%
SBA
Fixed Base Rate August 2015 = 5.13%
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SBA 504 Loan Debenture Rate for August
SBA 504 Loan Debenture Rate for August
The debenture rate
is only 2.82% but note rate is 2.87% and the effective yield is 4.909%.
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AHEAD OF THE YIELD CURVE
AHEAD OF THE YIELD CURVE
Can the Federal
Reserve be oppugned?
Their next meeting
on interest rates and monetary policy is in just a few
weeks.
At their last
meeting the Fed made a one-word change to its language on conditions that would
justify a rate increase: It needs to see “some further improvement in the labor
market,” adding the modifier “some,”
“SOME” further
improvement? The labor market has shown continued progress since the FOMC
meeting, with U.S.
The next report on
jobs for the month of August comes out on Friday just before the long three day
weekend.
Perhaps more
attention should be paid to next week’s auction of the 30 year Treasury
bond.
The yield
differential or spread between long and short-term Treasury bonds has been on a
steady decline since the beginning of July, telling an interesting story of the
multiple forces shaping the market.
The trade is known
as a flattening yield curve and it practically means that investors have been
moving money over the last two months from short-term Treasury notes, such as
the 2-year and the 5-year maturity, to long-term Treasurys, most notably the
30-year maturity.
As 30-year
Treasury prices have been rising, the 30-year yield has lost over 45 basis
points since July 10.
The
slope of the yield curve—the difference between the yields on short- and
long-term maturity bonds—has achieved some notoriety as a simple forecaster of
economic growth. The rule of thumb is that an inverted yield curve (short rates
above long rates) indicates a recession in about a year. More generally, a flat
curve indicates weak growth and conversely, a steep curve indicates strong
growth.
Here is what the
30 year Treasury bond has been doing and this week’s interesting little
table:
2001-
5.49
2002-
5.43
2003-
ND
2004-
ND
2005-
ND
2006-
4.91
2007-
4.84
2008-
4.18
2009-
3.89
2010-
4.61
2011-
2.89
2012-
2.77
2013-
3.25
2014-
3.97
Wait a minute, why
no numbers for 2003, 2004, and 2005?
One month after
the 9/11 attacks, the Treasury 30 year bond is discontinued. When the Treasury
mothballed the 30-year bond in 2001, experts speculated it was trying to drive
down long-term interest rates, which had remained stubbornly high while the
Federal Reserve was slashing short-term interest rates to revive the economy.
When the Treasury discontinued the 30-year bond in 2001, its yield fell 35 basis
points in one day. Why? A shrinking supply of the 30-year Treasury bond caused
increased demand to drive rates down.
What does all this
mean?
I don’t
know.
At last month’s
auction, the government sold $16 billion in 30-year bonds at a high yield of
only 2.880 percent. This continues a declining yield trend at each of the 30
year Treasury auctions that has continued for the last few
months.
The 30 year
Treasury bond is currently at only 2.90%.
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OFF BASE
OFF BASE
Nobody
can oppugn the Federal Reserve on this.
A
three day weekend approaches. No only do they dictate short term interest
rates, they more importantly arbitrate what days are holidays.
According
to the Federal Reserve, here are our remaining holidays for
2015:
Labor
Day September 7
Columbus
Day October 12
Veterans
Day November 11
Thanksgiving
Day November 26
Christmas
Day December 25
