profluent
PROF-loo-ent
Flowing smoothly; flowing in full stream.
from Latin pro- (forth) + fluere (to flow)
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TIP OF THE WEEK
Procellous not profluent was October for SBA 7(a) loan
approvals.
SBA loans had propined small business in protean ways
with the guarantee fee waiver and SBA payments of P&I through the fiscal
year ending September 30th.
The prosaic promulgation reducing guarantee percentages
and imposing the guarantee fee prompted SBA 7(a) loan approval volume to drop
35%.
October 2021 7(a) loan approvals were at $804,764,600
while October 2020 loan approvals for that month were $1,232,723,000.
October 2019 7(a) loan approvals for that one month
period were $1,602,677,500, consistent with the prior three years.
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Indices:
PRIME RATE= 3.25%
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SBA 504 Loan Debenture Rate for October
For 20 year debentures, the debenture rate is only 1.54%
but note rate is 1.568% and the effective yield is 3.021%.
For 25 year debentures, the debenture rate is only 1.74%
but note rate is 1.765% and the effective yield is 3.157%.
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AHEAD OF THE YIELD CURVE
The pronunciamento from the Federal Reserve that later
this month they will start to reduce purchases by $15 billion per month -- $10
billion in Treasuries and $5 billion Agency MBS overshadowed the Treasury’s
announcement on its anticipated borrowing needs.
It turns out the government borrowed $570 billion LESS
than they thought they had to last quarter.
A part of that was a greater than anticipated increase in receipts.
As a result, the Treasury anticipates decreases in its
bond auction sizes. Overall, these
planned changes will reduce by $84 billion the auction sizes during the current
quarter from the level in the August-October quarter.
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
2016- 2.32
2017- 3.16
2018- 3.13
2019- 2.594
2020- 1.216
2021- 1.88
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.
After the job’s announcement of a nice increase of
531,000 in October, the 30 year Treasury bond DROPPED 7.8 basis points to
1.885%.
This drop was somewhat confounding, given that the robust
payrolls number, lack of improvement in the participation rate, and strong
hourly wage growth underlined inflation concerns.
Or it could be the carefully choreographed pivot in
monetary policy is part of a bigger dance with the Treasury refunding
announcement decreasing auction sizes.
Prognostications proliferate over the protean slope of
the yield curve but it could be profluent.
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OFF BASE
According to the Federal Reserve, here are our remaining
holidays:
Veterans Day November 11
Thanksgiving Day November 25
Christmas Day December 25
So why is Veterans Day on the 11th instead of a
Monday? Major hostilities of World War I
were formally ended at the 11th hour of the 11th day of the 11th month of 1918,
when the Armistice with Germany went into effect. It coincides with other
holidays such as Armistice Day and Remembrance Day, which are celebrated in
other parts of the world.
By the way, it is Veterans Day - a simple plural without
a possessive apostrophe (Veteran's or Veterans'). The United States government has declared
that the attributive (no apostrophe) rather than the possessive case is the
official spelling.
