In light of the Thanksgiving holiday here in the United States, I want to start with a message of thanks to those who have joined us on the roller coaster that has been the US economy in 2025, along with our thoughts on its impacts on the aircraft finance side of the industry.
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The trends in interest rates have been an interesting story to watch for a while now, but even more so with the Federal Reserve (“Fed”) actively considering whether they should continue to drop rates or not. Since the Labor Day holiday, the Fed has dropped its target rate by 0.50% in two 0.25% increments. These were the first rate changes the Fed made in 2025 after a period of drops at the end of 2024. They meet one more time this year and may or may not drop rates another 0.25%. Further complicating matters was the halt of updated economic data due to the government shutdown.
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But does this Fed action (or inaction) have a direct impact on aircraft lending rates?
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As discussed in previous articles, the Fed’s rate cuts do not necessarily mean aircraft loan rates drop by the same amount at the same time. This is because the Fed adjusts one specific rate tied to overnight bank borrowings. All other rates are driven by various market factors, primarily rooted in the US Treasury markets.
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A proxy I often use to discuss aircraft loan rate conditions is the 10-year Treasury note. I use this benchmark because it tends to reflect the overall trend in aircraft loan rates. I don’t focus on the exact number—just the trend between numbers. For example, on December 31, 2024, that rate closed at 4.576%. As of October 31, 2025, it was 4.079%, gradually dropping since a May 21 peak of 4.605%. These decreases weren’t sudden; they happened over time as the market anticipated the Fed’s 0.50% rate drop.
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What does this mean if you’re financing an aircraft? It means that rates overall have been trending down in the second half of the year, but they have largely priced in the adjustments the Fed has been considering at its meetings.
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What will happen in December? Who knows. But as with all things this year, buckle up—and let’s find out together.
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