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504 Rate Update

504 Program Rate Update for April 2015

4.591% – 20 Year Debenture Effective Rate *

Debenture Rate drops, however, Core CPI…

“Uncharted waters” is a term one hears very regularly as regards the location of the Federal Reserve in plotting a return to “normalized” interest rates. Given the various issues at hand: a fragile European political economy-think “Grexit”or even “Brexit”, a polarized domestic political stage, China’s economy slowing while the Shanghai Exchange reaches heights that make even the NASDAQ “” bubble pale, and the usual run of rumors of and outright war; one wonders if the Fed’s navigation charts bear the legend “Here be Dragons”.

The one constant in all of the uncertainty, seems to be that US Core CPI has been running at or about 2% for the past year. In other words, absent swings in food and energy prices, economic growth is sustaining a near normal rate of inflation. “Near normal rate of inflation” argues for “normalizing” interest rates. So perhaps that summer rate hike from the Fed is not so far off on the horizon?

Chart and Statistical Data is from September 2006 to April 2015

Debenture Rate 10 Year T-Note
Spread Over T-Note
April 2015
1.92% 0.59%
3.04% 0.85%
2.95% 0.66%
0.009570544 0.009570544

The likelihood of increasing rates always argues for fixing rates in commercial finance. But the argument is more than economic, as the cost or savings may only be apparent years into the future. The real argument for fixed rates is the ability to sleep at night. Without the possibility of fluctuations in the carrying cost of long term asset financing, most Borrowers sleep much more soundly. This logic applies to their Bankers as well.

Worry less, sleep better; fix rates with the 504.

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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