Interest Rates in 30-Year Perspective: The Case of U.S. 10-Year Treasury Rates

On Wednesday, June 13, 2018, the Federal Reserve increased the Federal funds rate for the 2nd time in 2018 and 7th time since December 2015.  It also signaled that 2 more hikes were likely this year.  The specter of increasing interest rates has caused concern about its impact on farm income via higher borrowing costs for production inputs and on the value of land.  While the Federal Reserve has control over the Federal funds rate, it can only influence other interest rates.  To obtain perspective on these other interest rates, this article reviews the last 30 years of U.S. 10-year Treasury bond interest rates, which is currently the most watched market-determined interest rate.  This review underscores that the Federal funds rate and market rates do not always move together.  More importantly, it underscores the importance of taking inflation into account when discussing interest rates.