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504 Rate Update

504 Program Rate Update for February 2015

4.546% – 20 Year Debenture Effective Rate *

“As the World waffles . . . “

Things economic and political seem to lack a clear sense of direction: in the EU Greeks and Brits may be coming or going; in the Ukraine the Russians appear to be staying; in Japan “Abenomics” seeks more and bigger “arrows”; overall the economy is growing . . . while deflating.

Chart and Statistical Data is from September 2006 to February 2015

Debenture Rate 10 Year T-Note
Spread Over T-Note
Feb 2015
2.46%
1.81% 0.65%
Mean
3.92%
3.06% 0.86%
Median
3.80%
2.97% 0.66%
STDev
0.012489622
0.009554231 0.006029022

While the underlying debenture rate has shifted around within a loosely 30 bps band since October of last year, one trend appears constant: the widening spread to the 10 year Treasury of the debenture. From 42 bps in October 2014 to 65 bps in February’s auction, the market is steadily asking incrementally more to fix a twenty year rate.

Spread to Treasury
Feb 2015: 0.65%; Jan 2015: 0.51%; Dec 2014: 0.50%; Nov 2014: 0.44%; Oct 2014: 0.42%

The debenture rate, being tightly correlated to the 10 year Treasury may yet move higher or lower, as the Treasury responds to specific events which drive risk free demand. However, clearly the market is expecting US rates to shift higher and is demanding an increasing premium for locking long term rates. Prudent lenders know that quarterly adjustable rates will have higher defaults, all things being equal, in a rising rate environment. Borrowers tend to be both grateful and, more importantly, performing as a result of such timely advice.

We welcome the opportunity to provide you and your borrowers with access to the long term fixed rates of the 504 program, and to earn your business.

* Note: Rates are subject to credit determination & auction pricing. Past performance is no guarantee of future results.

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South Central Tennessee Development
101 Sam Watkins Blvd.
Mount Pleasant, TN 38474
Office (931) 379-2918
Fax (931) 379-2640

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