The SBA and PROfluent

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.