Tuesday, October 10, 2017

The SBA and allision

A moving object striking against a stationary object.
From Latin allidere (to strike against), from ad- (toward) + laedere (to harm).

In maritime usage, the term allision is used for a vessel striking a fixed object, while collision is between two moving ships. Frequently, the word collision is used in both cases.


No allision with SBA 7(a) loan demand.  For the fiscal year ending September 30th, SBA 7(a) loan approvals totaled $25,447,458,000.

That is a 5 ½ % increase from the prior year.

The pick-up in SBA 7(a) loan approvals is good news for the economy.  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.

There is also no collision with SBA 7(a) loans and Washington as the authorized level for SBA 7(a) loans for this fiscal year is almost $30 billion.


SBA LIBOR Base Rate October =4.23%
SBA Fixed Base Rate October 2017 = 6.38%


SBA 504 Loan Debenture Rate for September

The debenture rate is only 2.59% but note rate is 2.635% and the effective yield is 4.376%.


There was an allision with Mother Nature and the economy.  Or was it a collision?  It would depend on whether or not you think the economy is really moving.

The number of workers on U.S. payrolls declined last month for the first time since 2010, reflecting major disruptions from hurricanes Harvey and Irma, Labor Department figures showed Friday.  Total nonfarm payroll employment declined 33,000, the U.S. Bureau of Labor Statistics reported.  The numbers reflect Harvey’s impact on Texas in late August, and Irma’s fallout in Florida in September.

A single sector -- food services and drinking places -- accounted for all the job losses and then some, with payrolls declining by an estimated 104,700 (0.9 percent) in just one month.   That means all the other sectors put together added 71,700 jobs.

Why would this one sector be so dramatically affected? Are the Houston area (where Hurricane Harvey caused massive flooding at the end of August) and the state of Florida (which Hurricane Irma rolled through on Sept. 10 and 11) especially restaurant-and-bar-heavy economies?  Florida and metropolitan Houston together accounted for almost 9 percent of national food services and drinking places employment in August.

The jobs report offered a mixed bag for traders in government bonds , but it showed the tightest labor market in 17 years was beginning to translate into higher wages. Higher salaries can stoke inflationary pressures, affirming the Fed’s adherence to the Phillips Curve, an economic theory which says lower unemployment should bubble up as inflation.  Further discourse on the Phillips Curve might be revealed when minutes from the Federal Reserve’s last meeting on interest rates are released on Wednesday.

On Friday the 30-year bond yield rose to 2.907%, helping to bookend a 5 basis week long gain.

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

At last month’s sale, the awarded 2.790 percent high yield was 12.8 basis points lower than August’s rate and 38 basis points below the two and a half year auction peak for the bond reached in March.

Here is what the 30 year Treasury bond has been doing and this week’s interesting little table:
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
2016- 2.32

What does all this mean?

I don’t know.

The long end of the yield curve as reflected in the 30 year Treasury bond appear to be enervating any splenetic presentiment of a bigly recrudescence in interest rates by being quiescent.


Yesterday was Columbus Day.

According to the Federal Reserve, here is our remaining holidays for 2017:
Columbus Day October 9
Veterans Day November 11
Thanksgiving Day November 23
Christmas Day December 25

If anybody criticized you for taking the day off tell that this year Veterans Day falls on a Saturday.

Hopefully they won’t notice that since Veterans Day falls on a Saturday, Friday November 10th is considered a federal holiday.