The SBA and PROlusion

prolusion

prōˈ lo͞o zhan

a preliminary action or event; a prelude.   To warm up.

an introductory and often tentative discourse

From Latin prolusion-, prolusio, from proludere to play beforehand, from pro- before + ludere to play

 

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TIP OF THE WEEK

 

A new version of the SBA Standard Operating Procedures will be released soon and be effective around January 15, 2023.

 

SOP 50-10-6.1 will reflect changes in equity injection verification requirements, credit elsewhere, collateral requirements, and an overhaul of debt refinance requirements.

 

This SOP is a propaedeutic prolusion for upcoming changes reflected in recent Notices of Proposed Rulemaking on Affiliation and restrictions on loans for changes of ownership.

 

The notices are only proposed rule changes with the comment period ending on December 27, 2022.    Those changes won’t happen until well after the new SOP is released and effective.

 

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Indices:

PRIME RATE= 7.00%

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SBA 504 Loan Debenture Rate for October

 

For 20 year debentures, the debenture rate is only 4.89% but note rate is 4.96% and the effective yield is 6.13%.

For 25 year debentures, the debenture rate is only 5.04% but note rate is 5.09% and the effective yield is 6.219%.

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AHEAD OF THE YIELD CURVE

 

As prognosticated, the Federal Reserve’s Fed Open Market Committee raised the fed funds rate target by 75 basis points to 3.75-4.00 percent.

 

The FOMC statement for November 2 was the same as the one from September 21 with the exception that it added forward guidance on the cumulative impact of prior hikes to its anticipation of further rate hikes.

 

This is a fairly good signal that the FOMC may not pause on rate hikes.

 

Eurodollar futures can be prospicient.

 

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 several decades.

 

Here is a summary of what the market expects for Eurodollar futures based upon the pit-traded prices at the Chicago Mercantile Exchange:

 

DEC22- 5.117

DEC23- 5.03

DEC24- 4.26

DEC25- 3.96

DEC26- 3.97

DEC27- 4.09

 

What does all this mean?

 

I don’t know.

 

The December 2022 implied rate is now at 5.12% up from 4.73% just last month and up from only 0.17% a year ago.

 

This week on Thursday there will be an auction of 30 year Treasury bonds.   At last month’s auction of 30 year Treasury bonds, the high yield was awarded at 3.930 percent, up from 3.511 percent at last month’s auction.      The 30 year Treasury yield is now at 4.253%.

 

For all the protervity of an inverted yield curve, the 3 month and 10 year yields have not maintained a sustained inversion.   The last time they inverted for any length of time was back in 2019.

 

 

The procacity over the yield curve is profluent proditomania.

 

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OFF BASE

 

Don’t forget to vote.

 

Ever wonder why elections are always a Tuesday in November?

 

The answer stems from the agrarian makeup of 19th-century America. In the 1800s, most citizens worked as farmers and lived far from their polling place. Since people often traveled at least a day to vote, lawmakers needed to allow a two-day window for Election Day. Weekends were impractical, since most people spent Sundays in church, and Wednesday was market day for farmers.

 

With this in mind, Tuesday was selected as the first and most convenient day of the week to hold elections. Farm culture also explains why Election Day always falls in November. Spring and early summer elections were thought to interfere with the planting season, and late summer and early fall elections overlapped with the harvest. That left the late fall month of November—after the harvest was complete, but before the arrival of harsh winter weather—as the best choice.

 

It is not propaganda when the Federal Reserve promulgates official holidays.    A three day weekend approaches!

 

The Federal Reserve has proscribed banks from being opened on the following days:

Veterans Day November 11

Thanksgiving Day November 24

Christmas Day December 25