U.S. economy: Fairly steady on the surface, turbulent underneath

June 22, 2026

The U.S. economy is absorbing geopolitical shocks with surprising resilience, even as rising inflation puts pressure on interest rates, commodities and supply chains. Across markets, a common thread has emerged: Uncertainty is forcing decision-makers to adapt in real time. From stubborn inflation and shifting rate expectations to volatile grain markets, fiber shortages and a utility landscape reshaping before our eyes, the mood is one of pragmatism.

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Interest rates

Rising inflation, strong jobs report leave rates stuck

Jeff Milheiser

The outlook for interest rates in 2026 has shifted sharply—and not in the direction markets had hoped for. Investors began the year expecting the U.S. Federal Reserve to cut rates, but the Iran conflict has pushed inflation—and inflation expectations—higher.

Inflation has indeed risen. 

The Consumer Price Index shows annual inflation at 4.2% in May, a three year high, with a 0.5% monthly increase driven largely by energy prices. The Personal Consumption Expenditures index, the Fed’s preferred inflation gauge, shows 3.3% annual inflation and a 0.2% monthly rise in April. May data releases on June 25.

With inflation elevated and the labor market now strengthening—employers added 172,000 jobs in May, far above expectations—the Fed has little justification to ease policy. In fact, markets are leaning slightly toward a rate hike rather than a cut.

As for inflation easing, even an immediate end to the war wouldn’t quickly undo the damage. Elevated prices may linger longer than markets would like.

Reflecting this new reality, the Fed announced at its June 17 meeting that it is keeping its benchmark fed funds rate unchanged at a target range of 3.5% to 3.75% and hinted at a possible rate hike later in the year.

Jeff Milheiser is vice president, Funding and Investments, in CoBank’s Treasury Group. He graduated from Purdue University and has been with CoBank for more than 23 years.

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Derivatives

Adage rings truer than ever: We don’t know the future; therefore, we hedge

Eric Nickerson

CoBank customers have largely adjusted to a reality that looks very different from what many expected just a few months earlier. The initial shellshock of not seeing lower rates anytime soon has given way to acceptance.

Today, the market is pricing in the possibility that the next meaningful move could be a rate hike—not a cut. That shift has prompted many borrowers to rethink their approach to interest rate risk. Instead of waiting for clarity, customers are increasingly hedging amid a highly uncertain interest-rate outlook.

The underlying principle of derivatives holds truer than ever: We don’t know the future; therefore, we hedge.

Eric Nickerson is CoBank’s head of Customer Derivatives. He has 25 years of experience in providing financial risk solutions to corporate and financial institutions. He joined CoBank in 2019 after 19 years in the securities industry.

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Capital markets

Primary lending market thaws; investors play favorites in the secondary market

Craig Smith (primary market) and Todd Helman (secondary market)

Back in April, the primary lending market was stuck in a cautious, yellow light mood. Two months later, the light is green. Markets have thawed after the Iran conflict’s initial inflation shock, and, with June through mid-August typically a prime issuance window, it’s shaping up to be a busy summer before activity slows as we get to Labor Day.

Where borrowers go depends on their needs. Commercial banks—healthy and flush with deposits—are aggressive in the one-to-two-year space. Companies needing size and longer terms, especially those tied to the data center buildout and its massive power financing demands, are heading to the bond market. The Farm Credit System continues to serve the middle tenors.

With rate cuts priced out, companies that waited for cheaper money are issuing now, rather than risking higher rates later. Spreads are stable to declining, and repricing is back.

In the secondary loan market, one theme stands out: rating averages no longer tell the whole story. Investors are choosing industries, and their margin differences are striking. 

BB‑rated loans average SOFR plus about +250 basis points. Chemical sector loans sit ~50 bps wider, and Building Products sector loans—hit by housing‑slowdown fears—spiked to +332 in April before recovering to +254. Sector’s outperforming include Gas Utilities and Beverages.

The pattern is even sharper in single‑B territory: Building Products loans still average +841, down from nearly +1,500 during spring volatility. The clear winner is Electric Utilities, pricing +320, about 100 bps below the single‑B average of +432 as AI‑driven power demand boosts appetite for generation exposure.

The takeaway: Look past the rating. Industry matters.

Craig Smith is co-head of Capital Markets, at CoBank. Prior to joining CoBank in 2019, he worked in investment banking and as an M&A, securities and banking attorney.

Todd Helman is a lead relationship manager for Loan Sales and Facilitation in CoBank’s Capital Markets Group. He joined CoBank in 2023 from Waveson Capital and previously held roles at Huntington National Bank, BBVA USA and S&P Global Ratings.

Market Focus

Agribusiness

Isolated early-season weather challenges mark planting season; ‘27 fertilizer decisions loom

Marcus Wilhelm

Mother Nature—farmers’ perennial frenemy—has been the dominant force in the U.S. grain market this season, and it shows. Planting season generally progressed well, but extremes told the real story: The eastern Corn Belt faced excessive moisture, while the west battled severe drought, cutting yield potential.

With cash corn hovering near $4 per bushel—about a 10% recent drop—the setbacks sting as input costs climbed from roughly 16% upward of 40% on farm budgets. Diesel prices, pushed higher by geopolitical tensions, added more pressure.

Soybeans saw a brief lift from new renewable volume obligation rules boosting soybean oil demand, but prices have since softened. Early wheat harvests in Oklahoma and southern Kansas show lower yields, pushing local prices higher and leaving U.S. wheat uncompetitive globally.

The biggest emerging concern is fertilizer for the 2027 crop. As of publication date, the Strait of Hormuz appears ready to reopen, based on the memorandum of understanding signed by the U.S. and Iran. But high global prices are expected to ease only after 12 – 18 months, once normal movement resumes. Committing to purchases early feels risky, but delaying raises supply chain challenges (e.g., Will the fertilizer arrive in time?). Even with strong U.S. production, producers are exporting to capture higher margins abroad, keeping domestic prices elevated.

Marcus Wilhelm is Western region president of CoBank’s Agribusiness Banking Group, based in Omaha. He also co-owns an 800-acre corn and soybean family farm in Unadilla, Nebraska.

Recent CoBank Capital Markets Activity

Aurora Cooperative Elevator Company

$310M Credit Facilities
Administrative Agent, Lead Arranger & Bookrunner

Corteva, Inc.

$1.25B Credit Facility
Administrative Agent & Sole Bookrunner

POET Grain, LLC

$500M Credit Facility
Administrative Agent & Issuing Lender

Digital Infrastructure

The race for fiber: AI’s appetite could squeeze rural broadband builders

Jeff Johnston

Fiber-to-the-home operators across rural America are racing to build out underserved areas while government grant dollars are still flowing. But—while it’s not time to start worrying—a potential speed bump is emerging, and it’s coming from an unlikely source.

The AI data center boom has fueled fierce competition for fiber-optic cable—the same fiber rural builders need. Hyperscalers are locking up enormous, multiyear supply contracts with Corning, the 800-pound gorilla of domestic fiber. 

Meta led off in January with a deal worth up to $6 billion. On June 8, Amazon followed with its own multibillion-dollar agreement. Corning has signaled that more hyperscaler commitments are still to come.

The result is a textbook supply-and-demand imbalance. Demand has surged so quickly that the supply chain simply hasn’t responded fast enough. And, depending on how it plays out, smaller operators could feel it on two fronts: availability and cost.
 
Fiber prices have jumped as much as 50% since January, with more increases expected. Optical gear from vendors like Ciena and Calix faces extended lead times for the same reason—much of it ending up inside hyperscaler data centers.

Rural operators may not be in crisis territory yet, but these are real supply chain headwinds that could begin to affect the timing of some fiber network buildouts.

Jeff Johnston is lead economist, Digital Infrastructure, at CoBank. Prior to joining CoBank in 2018, he was an equity analyst covering tech, media and telecom and held senior management roles in the telecommunications industry.

Recent CoBank Capital Markets Activity

Data Center

$308M Credit Facility
Coordinating Lead Arranger

Data Center

$2B Credit Facility
Coordinating Lead Arranger

Data Center

$770M Credit Facilities
Coordinating Lead Arranger

Power & Energy

A new electric utility elephant in the room; Will RECs jump into the M&A game?

Brock Taylor

Mergers among investor-owned electric utilities have surged over the past two years. The latest—NextEra Energy’s proposed merger with Dominion Energy—would create a new elephant in the room: the world’s largest regulated electric utility by market cap, serving roughly 10 million customers across Florida, Virginia, North Carolina and South Carolina.

Rural electric cooperatives have been only minor players in utility M&A, given their member-focused, nonprofit model. But that may be changing. As investor-owned utilities evaluate alternatives to allocate capital, some may be considering divesting rural service areas that have lower return characteristics.

Earlier this year, Oregon Trail Electric Cooperative announced a $154 million deal to acquire Idaho Power’s entire Oregon service territory, adding ~20,000 customers and nearly doubling its footprint. Idaho Power cited shifting growth priorities and saw OTEC as a strong local fit.

If regulators approve the deal, it raises a bigger question: In today’s shifting utility landscape, is there opportunity for co-ops to more actively pursue investor-owned assets?

Brock Taylor leads CoBank’s Power, Energy and Utilities Banking Group. He joined CoBank in 2006 and has held roles across multiple business lines, including Corporate Agribusiness, Electric Distribution and Power Supply.

Recent CoBank Capital Markets Activity

IP Darden Construction I, II, II, IV, LLC

$4.95B Credit Facilities
Coordinating Lead Arranger

Bay Runner Pipeline, LLC

$1.27B Credit Facilities
Coordinating Lead Arranger

Rayburn Country Electric Cooperative, Inc.

$150M Credit Facility
Lead Arranger, Administrative Agent & Sole Bookrunner

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