Jetloan Capital predicts that borrowing rates will not start go down anytime soon.
In the last two months, the Federal Reserve has lowered the federal funds rate by 75 basis points. However, during the same period, the 10-year treasury yield has increased by 79 basis points. While many economists were predicting a recession, the combination of low unemployment and a resilient economy suggests that the bond market is not aligning with those expectations. In fact, the rise in longer-term yields indicates that markets may be anticipating stronger economic growth, higher inflation, increased government debt or a mix of all three.
As a result, long-term yields have moved in the opposite direction of the federal funds rate. The 10-year treasury yield, for example, has increased from 3.63% on September 16 to 4.42% today.
For those looking to finance aircraft, this shift in the bond market has translated into higher borrowing costs. Many aircraft lenders base their financing rates on the 5-year U.S. treasury yield, which means that borrowing costs have actually risen over the past couple of months. Given the current economic landscape, it seems likely that interest rates will remain stable or increase in the near future.
