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Farm Credit Administration board meetsFarm Credit Administration board meets
Debt volume outstanding growing steadily
March 10, 2017
2 Min Read
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The Farm Credit System's debt volume outstanding and its portion of the agency debt market have been growing steadily, according to a report the Farm Credit Administration board received on FCS funding conditions. The report discussed factors impacting the overall $2 trillion agency debt market.
As of Dec. 31, 2016, the system's $258 billion in debt outstanding represented 13% of the agency debt market.
The report discussed how various factors have affected the cost of the system debt, the processes it uses to issue debt, its ability to issue debt and investor sentiment toward system debt. These factors include domestic and foreign monetary policies, recently implemented financial regulations and the system's long-standing strong financial performance.
According to the report, FCS debt yields have increased since December 2015 when the Federal Reserve increased the federal funds target range from the level set in December 2008.
Substantial volatility in 2016 gave the system the opportunity to exercise call options on $58 billion of callable debt, which was $5 billion more than the two previous years combined. Despite this sizeable spike in call volume, the system's net interest spread continued to decrease because of competitive pricing pressures on assets.
Since the February FCA board meeting, the following notational votes have occurred:
On Feb. 16, the board granted preliminary approval of the proposed plan of merger of Badgerland Financial and its wholly owned subsidiaries, and 1st Farm Credit Services, ACA, and its wholly owned subsidiaries, with and into AgStar Financial Services, ACA, and its wholly owned subsidiaries. The continuing association will be renamed Compeer Financial, FLCA. If the voting stockholders of the three associations vote to approve the plan of merger and all conditions for final approval are met, the merger will take effect on July 1, 2017.
On March 6, the board granted preliminary approval of the proposed plan of merger of United FCS, ACA, and its wholly owned subsidiaries, with and into AgCountry Farm Credit Services, ACA, and its wholly owned subsidiaries. The continuing association will be AgCountry. The board’s approval is subject to certain conditions. If all requirements for the final approval are satisfied, the merger will take effect on July 1, 2017.
On March 8, the board removed the regulatory capital conditions and limitations it had previously imposed on system institutions’ outstanding issuances of preferred stock and subordinated debt to outside investors (i.e., investors other than the cooperative member-borrowers of the institutions) and confirmed the regulatory capital treatment of these issuances under FCA’s new tier 1/tier 2 capital rule. The new capital rule became effective on Jan. 1, 2017.
Source: Farm Credit Administration
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