March 9, 2021
The 10-year Treasuries are on the move higher. The ten year was just over 1.00% at the beginning of February and it is now nearing 1.60%. Other medium to long rates have also seen similar increases but the short end, one year or less hasn’t seen much increase. So, if you are on a variable rate you haven’t noticed the increase in the rates. But if the Fed decides not to continue with the zero interest rates and starts to increase the Fed Funds Rate, you will start to see the affect. And by that time, long rates may have increased even more. The yield curve has substantially steepened with the spread between three month T-bills and 10 year bonds at 150 basis points, up 50 bps just since the beginning of February. While the rates remain very low on a historical basis, the percentage increase has been substantial. The bond market is telling us they think that interest rates are moving higher and possible inflation may start to rear its head. The economy was already starting to expand at a rapid “snap back” pace and with today’s passage of the $1.9 Trillion stimulus, the economy may rocket higher in the second half of 2021. A strong economy usually means rising rates.
The dollar has been drifting lower against major currencies which is good for agriculture.
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