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504 Rate Update

504 Program Rate Update for May 2015

4.850% – 20 Year Debenture Effective Rate *

4.374% – 10 Year Debenture Effective Rate *

Today’s vocabulary word: Weltanschauung

Welt·an·schau·ung ‘veltˌänˌSHouəNG/ * noun defined as a particular philosophy or view of life; the worldview of an individual or group. (German)


Imagine, if you will, Bavarian Hip Hop…this past week the D-Bund, Germany’s ten year government note, demonstrated serious skills as it shot up from near negative rates to a still ridiculously low rate of 0.6%, moving upward some 54 bps. Do that with a tuba strapped to your chest!

While wrestling with that image, consider that the US Ten Year Treasury Note saw-toothed back up to 2.21%, continuing a very slight upward trend over the past four months. Meanwhile, the underlying 504 twenty year debenture went along for only part of the ride, rising to 2.77%, while the spread continued a slight downward trend to 56 bps.

2015 May

Chart and Statistical Data is from May 2006 to May 2015

Debenture Rate 10 Year T-Note
Spread Over T-Note
May 2015
2.21% 0.56%
3.03% 0.85%
2.94% 0.66%
0.009558909 0.005959235

In our last rate discussion we posited that a sustained core CPI rate near two percent might induce the Fed to raise rates sooner rather than later. Given that the core PPI rate released last week had no sign of inflation, might we back off on that claim?

Which brings us to a certain worldview. Economics may be data dependent, but politics is driven by behavior and other less rational drivers. The Fed is under increasing pressure from some whose Weltanschauung demands that inflation be seen behind every rock and bush, and what better way to help forestall legislative remedies than to accede to a slight rate hike?

Which brings us, finally to the 504 Debenture. Rather than wrestle with German philosophy and economics or less rational impulses, why not just finance with a long term fixed rate and lock in lower costs?

We welcome the opportunity 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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