The SBA and PROclivity

Proclivity

proh-kliv-i-tee

 

an inclination or predisposition toward something especially : a strong inherent inclination toward something objectionable

 

From Latin prōclīvitās tendency, literally, a steep descent, steepness, equivalent to prōclīv(is) sloping forward, steep (prō-pro-1 + clīv(us) slope + -is adj. suffix

 

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TIP OF THE WEEK

 

SBA has a proclivity to change things up.

 

SBA SOP 50-10-7 was effective August 1st, 2023.

 

A technical update has not yet been released clarifying some issues that arose in the initial version of the SOP.

 

For example, the new SOP did not include language that allows a maximum maturity of 25 years when the loan is for mixed purposes and 51% or more of the proceeds is used for real estate.

 

The State Small Business Credit Initiative (SSBCI) and State Small Business Loan Guarantee Program has a propensity to keep it simple.    Amortization is not based upon use of proceeds but instead on the cash flow of the borrower.

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Indices:

PRIME RATE= 8.50%

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SBA 504 Loan Debenture Rate for August

 

For 20 year debentures, the debenture rate is only 5.13% but note rate is 5.2039% and the effective yield is 6.609%.

For 25 year debentures, the debenture rate is only 5.15% but note rate is 5.20364% and the effective yield is 6.554%.

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AHEAD OF THE YIELD CURVE

 

What’s the difference between proclivity and propensity?

 

More importantly, what’s the difference between modest and moderate?

 

The Federal Reserve at their last meeting on monetary policy changed their assessment of the economy from modest to moderate.

 

Otherwise, the Fed’s statement on monetary policy was virtually unchanged outside of the language regarding the rate move.

 

The change was “Recent indicators suggest that economic activity has been expanding at a moderate pace.”   Previously everything was at a modest pace.

 

“Moderate” is a bit stronger growth than “modest” in the Federal Reserve's idiosyncratic lexicon.

 

Does that mean the Federal Reserve will continue to raise rates at their next meeting in late September?

 

Fed Fund futures can be prospicient.

 

Fed Fund futures are a direct reflection of collective marketplace insight regarding the future course of the Federal Reserve’s monetary policy.

 

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

 

DEC23- 5.41

DEC24- 4.25

 

What does all this mean?

 

I don’t know.

 

Results were good for last week’s 30-year bond auction as the market continues to show a hearty appetite for Treasury paper in the face of much bigger offerings.

 

The auction was upsized to $23 billion from $18 billion in the last two months. The offering size remains below its record high of $27 billion in August 2021, exactly two years ago, when rates were half their current level.

 

The high yield was awarded at 4.189 percent, up from 3.910 percent in July.

 

Keep your eyes and ears open for Wednesday’s release of the minutes from the Federal Reserve’s last meeting on monetary policy.

 

The propounding profundity over promulgating moderate or modest could be procacious prolix.

 

 

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OFF BASE

 

What’s the difference between propensity and proclivity?

 

Propensity is an inclination to behave in a particular way.    It is from Latin pro- (toward) + pendere (to weigh).

 

Proclivity is derived from a Latin word “pro” and “clivus.” While “pro” means “forward,” “clivus” means “slope.”

 

Thus the term has derived its meaning as “having an inclination” or “leaning DOWN towards” something.

 

Proclivity is used more when describing a negative inclination while “propensity” is used equally for a negative or positive inclination.