Procacious
prō-kei-us
Insolent or arrogant in attitude or tone; forward, cheeky; provocative.
From Latin procax- “bold, impudent”
_____________________________________________
TIP OF THE WEEK
No need to be procacious about the SBA 7(a) loan program.
The SBA program for next fiscal year sets the 7(a) loan program at a ZERO subsidy rate.
That means the fees collected from borrowers and lenders are sufficient to cover the projected costs of the loan guarantee. No tax payer subsidy is needed.
The guarantee fee for loans of $350,000 or less is ZERO.
_________________________________________
Indices:
PRIME RATE= 3.50%
________________________________________
SBA 504 Loan Debenture Rate for April
For 20 year debentures, the debenture rate is only 3.38%
but note rate is 3.43% and the effective yield is 4.620%.
For 25 year debentures, the debenture rate is only 3.50%
but note rate is 3.54% and the effective yield is 4.680%.
_______________________________________________
AHEAD OF THE YIELD CURVE
The procacity over the yield curve inverting is profluent
proditomania.
Driven by a weak auction of 2 year treasury notes almost
three weeks ago, the 2 year treasury yield jumped to over 2.365%, up a whopping
81.2 basis points from the prior month's auction rate and the highest awarded
since February 2019.
That caused the widely followed spread between 2- and
10-year Treasury yields to become negative and prognostications proliferated
that this inversion of the yield curve meant a recession was now on the way.
However, there is nothing “magical” about the “10/2”
spread.
The spread between the 3 month Treasury bill and the 10
year Treasury bond is considered an even better indicator.
Right now, the current Treasury yield curve is
historically very steep from 3-months to 2-years a bit flatter than normal from
2- to 3-years, and slightly inverts from 3- to 10-years. Spreads between the 3 year Treasury and the
Fed funds rate is at its widest since 1994.
This procellous slope of the yield curve is driven by
concerns on what the Federal Reserve is going to do about inflation.
One of the Fed’s leading indicators on inflation is
capacity utilization which measures the amount of a plant that is in use at
factories, mines and utilities.
Keeps your eyes and ears open for this week’s report on
industrial production and capacity utilization.
Here is what capacity utilization has been doing and this
week interesting little table of data:
2007- 81.5
2008- 79.9
2009- 66.9
2010- 74.8
2011- 76.7
2012- 79.0
2013- 77.8
2014- 78.8
2015- 76.5
2016- 75.4
2017- 76.2
2018- 78.5
2019- 79.7
2020- 74.5
2021- 76.4
What does all this mean?
I don’t know.
Normally the Fed does not feel there are inflationary
pressures until the capacity utilization rate is about 82%.
Last month capacity utilization was up 0.3 percent to
77.6 percent. This still almost 2
percentage points below the long run average dating back to 1972.
The Federal Reserve Open Market Committee next meets May
3rd and 4th.
Eurodollar futures settle at a three- month lending rate
that has averaged about 22 basis points more than the Fed's target over the
past 10 plus years.
The December 2022 implied rate is now at 3.00% up from
2.06% just last month and up from only 0.17% in October.
__________________________________________
OFF BASE
If you happen to watch a major league baseball game on
Friday, April 15th you might notice that all the players are wearing number
42. It is the only day you will see any
player with that number on their jersey.
In 1997, MLB retired number 42 across all major league teams.
That is in honor of Jackie Robinson. 42 was his jersey number. April 15 was Opening Day in 1947, Robinson's
first game in the major leagues with the Brooklyn Dodgers.
For some strange reason it is not a national
holiday. We are now in the longest
stretch of the year without a holiday.
The Federal Reserve has proscribed banks from being
opened on the following days:
Memorial Day May 30
Juneteenth
June 19
Independence Day July 4
Labor Day September 5
Columbus Day October 10
Veterans Day November 11
Thanksgiving Day November 24
