The SBA and PROtend

Protend

proh-tend

verb (used with object)

to stretch forth.

to extend in duration; postpone; defer

verb (used without object)

to stretch forward.

 

Latin protendere, from pro- + tendere to stretch

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TIP OF THE WEEK

 

SBA has not protended on SBA 7(a) guarantee fees effective October 1st, 2023.

 

The new guarantee fees are:

 

For loans of $1,000,000 or less: 0.00%.

 

For loans of $1,000,001 to $2,000,000: 1.45% of the guaranteed portion of the loan up to and including $1,000,000, plus 1.70% of the guaranteed portion of the loan over $1,000,000.

 

For loans $2,000,001 and greater: 3.50% of the guaranteed portion of the loan up to and including $1,000,000, plus 3.75% of the guaranteed portion of the loan over $1,000,000.

 

The State Small Business Credit Initiative (SSBCI) and State Small Business Loan Guarantee Program guarantee fee is 2.5% of the guarantee portion.

 

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Indices:

PRIME RATE= 8.50%

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SBA 504 Loan Debenture Rate for September

 

For 20 year debentures, the debenture rate is only 5.39% but note rate is 5.466% and the effective yield is 6.867%.

For 25 year debentures, the debenture rate is only 5.41% but note rate is 5.464% and the effective yield is 6.812%.

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AHEAD OF THE YIELD CURVE

 

Will the Federal Reserve protend interest rate increases when it meets on monetary policy on September 19th and 20th?

 

Fed policymakers might find the August employment report in line with their expectations for a cooling labor market.    The numbers could support a decision to pause in hiking rates at the September meeting.

 

Interpreting the August increase there are other factors to take into account.  The bankruptcy at Yellow Corp. led to a 36,700 decline in truck transportation. This will be a one-off and many of these workers could find jobs elsewhere due to a reported shortage of drivers.

 

On Wednesday the Bureau of Labor Statistics will report on the consumer price index for last month.

 

Also on the same day, keep your eyes and ears open for the Treasury’s auction of $20 billion in 30 year Treasury bonds.

 

This auction provides the bond market interpretation of the CPI data.

 

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

2022- 2.375

2023- 3.741

 

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.

 

So what does all this mean?

 

I don’t know.

 

The offering of $20 billion is slightly less than the $23 billion last month.    It had been $18 billion the prior 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.

 

Results were good for last month’s 30-year bond auction as the market continues to show a hearty appetite for Treasury paper.

 

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

 

The 30 year Treasury closed at a yield of 4.34% on Friday.

 

 

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OFF BASE

 

Summer protends until the fall equinox on September 22nd.

 

The word “equinox” comes from Latin aequus, meaning “equal,” and nox, ”night.” On the equinox, day and night are roughly equal in length.

 

After the autumnal equinox, days become shorter than nights as the Sun continues to rise later and nightfall arrives earlier. This ends with the winter solstice, after which days start to grow longer once again.