Procurator
proc·u·ra·tor
a person who acts or does business for another
Latin procurator ‘administrator, finance agent’, from
procurat- ‘taken care of’, from the verb procurare ‘take care of, manage’, from pro- ‘on behalf
of’ + curare ‘see to’.
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TIP OF THE WEEK
With its new Risk Mitigation Framework, SBA has now
become the procurator for all SBA 7(a) lenders, even PLP lenders.
As a result SBA, not lenders, determine whether an
applicant meets primary eligibility requirements.
SBA Applicants who obtained an EIDL loan or PPP loan will
often be flagged for potential fraud creating an ETRAN error code.
Any SBA 7(a) loan delayed because of an ETRAN error code
that cannot be resolved in a timely manner can instead utilize a SSBCI
guarantee.
There is NO guidance on amortization with a SSBCI
guarantee. Lenders can use any
amortization they want.
Amortizing a SSBCI guaranteed loan with a balloon payment
would then be eligible for a subsequent SBA refinance if the ETRAN error code
is eventually resolved.
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Indices:
PRIME RATE= 8.50%
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SBA 504 Loan Debenture Rate for December
For 20 year debentures, the debenture rate is only 5.23%
but note rate is 5.30472% and the effective yield is 6.707%.
For 25 year debentures, the debenture rate is only 5.28%
but note rate is 5.33413% and the effective yield is 6.594%.
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AHEAD OF THE YIELD CURVE
Our procurators of interest rates, the Federal Reserve at
their last meeting on monetary policy kept the fed funds rate in its range of
5.25 to 5.50 percent.
The most notable change is the insertion of
"any" in the policy outlook which now reads, "In determining the
extent of ANY additional policy firming that may be appropriate to return
inflation to 2 percent over time, the Committee will take into account the
cumulative tightening of monetary policy, the lags with which monetary policy
affects economic activity and inflation, and economic and financial
developments."
This would strongly suggest that the current tightening
cycle has peaked unless there is something that would prompt policymakers to
rethink it.
30-Day Fed Fund futures pricing data have long been
relied upon to express the market’s views on the likelihood of changes in U.S.
monetary policy.
Here are the Futures Implied Fed Funds
Dec-29-2023
5.33000
Feb-29-2024
5.29500
May-31-2024
4.90500
Aug-30-2024
4.44000
Nov-29-2024
4.07500
May-30-2025
3.42500
Nov-28-2025
3.21000
What does all this mean?
I don't know.
In its statement, the Fed maintained that inflation
remains elevated.
The long end of the yield curve prognosticates
inflationary expectations and ultimately market rate expectations.
Last week’s auction of 30 year treasury bonds the high
yield was 4.344 percent, down from 4.769 percent last month and from 4.837
percent two months ago.
On Friday the 30 year Treasury yield closed at 4.012.
The drop in yield reflects the month-long easing of
inflation risk.
More procellous promulgations on the yield curve’s
continued inversion is profligate.
An inversion of the 3 month treasury bill and 10 year
treasury note began in late October of 2022.
That makes this one of the deepest and longest inversions
going back to 1982.
The slope of the yield curve—the difference between the
yields on short- and long-term maturity bonds—has achieved some notoriety as a
simple forecaster of economic growth. The rule of thumb is that an inverted
yield curve (short rates above long rates) indicates a recession in about a
year, and yield curve inversions have preceded each of the last eight
recessions (as defined by the NBER).
Of course, it might not be advisable to take these
numbers quite so literally.
The underlying determinants of the yield spread today are
materially different from the determinants that generated yield spreads during
prior decades.
Differences could arise from changes in international
capital flows and inflation expectations, for example. The bottom line is that
yield curves contain important information for business cycle analysis, but,
like other indicators, should be interpreted with caution.
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OFF BASE
Christmas this year is on Monday December 25th . It is an official bank holiday according to
the Federal Reserve.
The next Monday is New Year's Day, also a bank holiday.
Happy Holidays!
