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504 Rate Update

504 March 2017 Rates


4.817% – 10 Year Debenture Effective Rate *

4.827% – 20 Year Debenture Effective Rate *


At what rate, might Rates rise?

After months of parsing statements from various central bankers with a degree of attention normally reserved for tea leaves, the consensus is that rates are rising!

Clearly, this makes an argument for small business and their lenders to mitigate rate risk through the long term fixed rates of the 504 program.  Even after the run-up after of recent months the underlying twenty year debenture rate is something of a bargain for a long term rate on a fully amortizing loan.  (The Ten Year Breakeven Inflation Rate has stalled over the past few weeks. Click Here For The 10-Year Breakeven Inflation Rate, April 2, 2017.)

Chart and Statistical Data is from September 2006 to March 2017

Debenture Rate 10 Year T-Note
Spread Over T-Note
March 2017
2.58% 0.46%
2.86% 0.80%
2.65% 0.62%
0.009591828 0.005555327

The bargain may be even better than it seems at first blush.  Currently the Federal Reserve remains in a very accommodating posture on two fronts: the fed funds rate and the some $4.4 Trillion in bonds on their balance sheet.  (Quarterly Report on Federal Reserve Balance Sheet Developments, March 2017.)  To say that unwinding the aftermath of QE I, II, & III,  is “uncharted territory”, ranks as truly prize understatement.  If growth or inflation should accelerate the Federal Reserve might have little choice but to increase the pace of rate hikes for fear of the sheer uncertainty in how to remove the accommodation of their current bond holdings.

Meanwhile, the U.S. Bureau of Economic Analysis released the February 2017 PCE index which showed a fourth consecutive month of growth over the prior year, finally breaching the 2% target.  Click Here For BEA News Release

The 504 twenty year debenture fixed rate keeps sounding better…

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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