Valley Ag Loans, Inc.

Farm Loan Industry Updates

September 27, 2023

Short term rates have gone sideways over the past 60 days but long rates are decidedly higher.  The Fed paused last Wednesday but the market decided that the economy is still hot, unemployment is still low, and inflation ain’t beat.  Daughter number three sent me a text this morning with gas in Riverside at $6.10/gallon.  She asked whether we made personal/family loans.  Fuel prices are higher and the dollar is stronger.  The feeling was maybe the Fed is done increasing rates and they did just that by holding where they were, but if current trends continue, we’ll likely see them increase rates at their October meeting.  The ten year treasury was 3.96% on July 28 and closed today at 4.61%.  4.00% had been a ceiling for a long time.  The one month bill over the same time has gone from 5.47% to 5.54%.  Inflation recently seemed to tic a bit higher after falling for a number of months.  If the numbers cooperate, hopefully inflation starts trending down again and the Fed will delay future increases.  But, I wouldn’t hold my breath for rate reductions for quite some time, barring a black swan event.

The rate curve inversion (2 month-10 year) has gone down to 98 bps (due to the rate increases at the long end).

The dollar has been gaining strength against all major currencies.