Monday, February 8, 2016

The SBA and splenetic

Bad-tempered; spiteful.
From spleen, from French esplen, from Latin splen, from Greek splen. Earliest documented use: 1398.

In earlier times it was believed that four humors controlled human behavior and an imbalance resulted in disease. According to this thinking an excess of black bile secreted by the spleen resulted in melancholy or ill humor. Also, the spleen was considered to be the seat of emotions. To vent one's spleen was to vent one's anger.


If you are being splenetic perhaps you should get out and grab a bite to eat.

Did you know that restaurants are by far and away the leading recipient of SBA loans?

The National Restaurant Association’s Restaurant Performance Index (RPI) fell sharply in December.   For the first time in nearly three years, restaurant operators reported a net decline in same-store sales.  Forty-two percent of restaurant operators reported a same-store sales gain between December 2014 and December 2015, while 43 percent reported a sales decline.  Restaurant operators also reported a net decline in customer traffic results in December.   Please let me know if you would like a copy of the National Restaurant Association’s report for December on its Restaurant Performance Index.

SBA LIBOR Base Rate February 2016 =3.43%
SBA Fixed Base Rate February 2016 = 5.00%
SBA 504 Loan Debenture Rate for January
The debenture rate is only 2.78% but note rate is 2.82869% and the effective yield is 4.831%.

Don’t get all splenetic about declining restaurant sales in December.  It was probably just a glitch as restaurants added 47,000 jobs in January.

Payroll growth slowed in January after a string of impressive gains as employers added 151,000 jobs, led by gains in retail, restaurants, health care and manufacturing.  Retailers added 58,000 jobs; restaurants, 47,000; and health care, 37,000. Perhaps most surprising was a 29,000 gain in hiring at manufacturers, the biggest increase since August 2013.

Treasury yields spiked after the jobs report, then tumbled toward a one-year low and rose again to trade slightly higher on the day in all maturities.

The yield on 2-year Treasuries was up 1.6 basis point on the day to 0.730%, suggesting the market expects a slightly more aggressive pace of interest-rate hikes by the Federal Reserve than it previously did.  Short-term Treasury yields are more vulnerable to changes in the Fed-funds rate, and tend to spike when the market’s rate-hike expectations increase.

At the other end of the yield curve, the 30 year Treasury bond was up 1.5 basis point to 2.713%.

Keep your eyes and ears open for this week’s auction of 30 year Treasury bonds.

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
2015- 2.91

What does all this mean?

I don’t know.

Last month’s30-year bond auction was strong and bidding was tight as the high yield was 2.905 percent.

Since then financial markets have been somewhat splenetic as the 30 year bond yield has drifted down about 20 basis points.

The yield curve is getting flatter.  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.

The implication is that concerns of recession are not being signaled and the pace of any interest rate increases will be fairly modest.

No reason to be splenetic.

Another reason to not be splenetic is that we have a three day weekend coming!

According to the Federal Reserve, here are our remaining holidays for 2016:

Washington's Birthday February 15
Memorial Day May 30
Independence Day July 4
Labor Day September 5
Columbus Day October 10
Veterans Day November 11
Thanksgiving Day November 24
Christmas Day December 26 

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