Profound
pro·found
difficult to fathom or understand
very great or significant
from Latin profundus, from pro- before + fundus bottom
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TIP OF THE WEEK
The most recent changes to SBA’s SOP are profound.
SBA SOP 50-10-8.1 will be effective October 1st
2026.
Proficiency with SBA lending requires knowing SOP 50-10-8.
It has a prolix 147,517 words over 416
pages. That’s an improvement over the prior SOP 50-10-8
which had 163,291 words and 467 pages.
The biggest changes are focused on business acquisitions
with increased debt service coverage requirements and how to amortized
acquisitions that include both real estate and a business.
The guidance manual for SSBCI guarantees has only 6,742
words. Only 22 pages.
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Indices:
PRIME RATE= 6.75%
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SBA 504 Loan Debenture Rate for August
For 20 year debentures, the debenture rate is only 5.08% but
note rate is 5.15332% and the effective yield is 6.026%.
For 25 year debentures, the debenture rate is only 5.14% but
note rate is 5.19340% and the effective yield is 6.033%.
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AHEAD OF THE YIELD CURVE
The prodigal son, the bond vigilantes, return.
Rates on the longer end of the yield curve continue to
climb.
At last week’s $25 billion auction of 30-year Treasury bonds
the high yield was awarded at 5.216 percent versus 5.058 percent a month ago.
This rate is a full ½ percent higher than it was at the
beginning of the year.
This $25 billion offering was an increase compared to $22
billion the month prior.
The increased supply is causing prices to down causing the
yields to go up.
Here is what the 30 year Treasury bond has been doing and
this week’s interesting little table of data:
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
2024- 4.015
2025- 4.773
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 long end of the yield curve prognosticates inflationary
expectations and ultimately market rate expectations.
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OFF BASE
We have now past the metrological midpoint of summer with
only 38 days left until the first day of autumn.
