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504 Rate Update

504 Program Rate Update for May 2014

5.080% – 20 Year Debenture Effective Rate *

4.508% – 10 Year Debenture Effective Rate *


SBA 504 Program Continue Slide

While the May auction results for the current debenture were interesting in continuing a slightly declining rate trend, the real action was in the decrease in the spread to Treasuries, which dipped to a near record low of 39 bps.

Consider this in light of our comments from last month’s discussion of rates, and this month’s commentary from the DCFC letter. Last month, we discussed the likelihood of a period of stable and low Treasury rates in light of the declining supply of Treasury debt coming to market due to the substantial declines in federal budget deficits. This month, DCFC points out that downward pressure is also being exerted from the demand side as pension funds are buying bonds as a function of regulatory and liability matching issues. The implication of the declining spread may be that Debentures are being viewed favorably as a surrogate for Treasury paper and that DCFC is successfully broadening the market.

In combination these events could likely continue to offset the decline in Fed bond purchases under quantitative easing. Add a touch of St. Vladimir, the patron saint of global uncertainty, a smidgen of absence of significant inflationary pressures; and through the alchemy that is the Bond Market, you have lower long term interest rates.

Chart and Statistical Data is from September 2006 to May 2014

Debenture Rate 10 Year T-Note
Spread Over T-Note
May 2014

How long can this financial prestidigitation last? Hopefully long enough for our political system to realize that all good things must come to an end and that this window of opportunity for a maximally viable and beneficial reinstatement of the 504 refinance program will go the way of all things.

In the meantime, you need to have a CDC partner who can rapidly deliver an approval and get you to closing. If your current partner moves at a rate likely to miss current rate opportunities, perhaps you rate a better CDC?

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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