Valley Ag Loans, Inc.

Farm Loan Industry Updates

May 18, 2022

Interest rates at all maturities have moved significantly higher over the past sixty days.  Most rates peaked a week ago and have come down a little, especially today with the stock market moving significantly lower and the flight to bonds.  One month rates moved from less 20 basis points to nearly 60 basis points.  Not much in absolute terms but a tripling of the rate.  The 10 year note has gone up about 100 basis points to about 2.88% after hitting 3.12% on May 6.  Inflation is a large concern but a slowing economy together with inflation, “stagflation”, is an even bigger concern.  The yield curve has steepened with the spread between three month T-bills and 10 year bonds now at 185 bps .  The Fed increased rates by 50 bps on May 5 and is expected to continue doing so at its next several meetings.  The Fed Chair, Powell, indicates he is determined to bring down inflation so expect rate increases until that happens.

The dollar continues its move higher against most world currencies.