Rates Drift Lower as Market Particpants Monitor Developments in the Middle East

Flash Update: US RATE MARKETS – TUESDAY OCTOBER 13, 2026

• US Treasury yields and SOFR swap rates are drifting lower this morning as crude oil prices retreat from last week’s highs

• “Big” Bank and tech sector corporate earnings reports are due this week and remain a key focus for markets

• Fed Governor Waller said this morning that the surge in long-term Treasury yields is helping curb demand in rate-sensitive sectors

• The US-Iran conflict and the price of crude oil, and resultant fear of higher inflation continue to be the primary focus for the rate markets

• Interest rates are likely to continue to be highly correlated to the direction of oil prices for the near term

• The next FOMC rate decision is due Wednesday, October 28th at 2:00 PM

• Next up for “key” economic data: CPI prints tomorrow, 10/14 at 8:30 AM; PPI & Retail Sales print 10/15 at 8:30 AM

• Short-term SOFR swap rates are trading down ~1-3 bps this morning, depending on tenor

• Medium-term SOFR swap rates are down ~3-5 bps currently, depending on tenor

• Long-end SOFR swap rates are trading down ~4-5 bps this morning, depending on tenor

Good morning – US Treasuryyields and SOFR swap rates are ticking lower this morning as the market monitors the myriad market forces at work. The conflict in the Middle East and the price of crude oil remain the primary market catalysts, but a jam-packed week of corporate earnings, the release of key inflation data and the upcoming FOMC meeting will all vie for the market’s attention the remainder of the week. Rates are a touch lower this morning, as Brent crude snapped a three-day run of gains. The inflation-sensitive back end of the curve is down the most this morning.

Traders will also continue to track economic data closely as they determine what is next for the Fed. Key upcoming data: September CPI is due tomorrow, 10/14 at 8:30 AM. September PPI and Retail Sales results are due on Thursday 10/15 at 8:30 AM. Fed-speak is also likely to be in focus for markets as we creep towards the October Fed meeting on 10/28. I think the upcoming inflation data will be critical for setting Fed monetary policy adjustment expectations for the fourth quarter of 2026.

Expectations for tomorrow’s release of the September CPI data are as follows: Headline MoM, 0.6% (vs. 0.4% the prior month); Headline YoY, 3.6% (vs. 3.4% prior); Core MoM, 0.2% (vs. 0.3% prior); Core YoY, 2.5% (vs. 2.4% prior). A better-than-expected CPI print likely rescales short-term Fed rate hike expectations and leads to lower rates across the board. Worse-than-expected inflation data likely leads to rising Fed rate hike expectations and higher rates, especially on the Fed-sensitive short end of the curve.

CHART OF THE DAY: SCHEDULE OF FED SPEECHES THROUGH 10/16/2026

A: Fed-Speak Schedule Through 10/16 – FOMC “Quiet Period” Begins 10/17

Note: FOMC Chair Kevin Warsh speaks on 10/15 at a Fireside chat with the IMF’s Georgieva.

Source: Bloomberg, LLP | FED SPEECH SCHEDULE THROUGH 10/16/2026

SOFR Swap Market - Quick Summary:

• The 1Y SOFR swap rate is trading down ~1-2 bps this morning. 2Y and 3Y SOFR swap rates are currently trading down ~1-3 bps. 5Y and 10Y SOFR swap rates are trading down ~3-5 bps this morning. The very back-end of the swap curve (20Y and 30Y) is currently trading down ~4-5 bps from yesterday’s closing levels.

• Last week, rates ticked slightly lower, particularly on the back end of the curve. 2-Year SOFR swap rates were down ~2 bps, but 10-Year SOFR swap rates were down ~6-8 bps last week.

“Key News” the market is tracking includes:

• Geopolitical developments continue to weigh on markets.Developments in the US/Iran “war” will continue to captivate the market’s attention. l

• Lack of forward guidance from the Fed is forcing traders to pay more attention to economic data – this may fundamentally change the way markets position for and react to Fed rate decisions going forward.

• There is still a sharp focus on the performance of the growing AI sector and more broadly, on what AI really “means” for the US and global economies. Overall market sentiment, and perhaps even economic performance, may be impacted by AI for the foreseeable future.

• Tariffs remain in focus, particularly the “trade war” situation between the US and Canada. US/China relations are always in focus.

CHART 1:US RATES SNAPSHOT: 9:00 AM Eastern

Chart 1 Key:

• Far Left Columns:US Treasury Yields & Change on Day (bps)

• Center Columns:SOFR OIS Swap Spreads (bps) & Change on Day (bps)

• Far Right Columns:SOFR OIS Swap Rates & Change on Day (bps)

Please note: Market levels can change rapidly – rate cap premiums are subject to a dynamic market that can change frequently.

UST YIELDS | SWAP SPREADS | SOFR SWAP RATES

Source: Bloomberg, LLP | 9:00 AM NY Rates Snapshot

CHART 2 & 2A: SOFR SWAP RATES EDGE LOWER AS MARKET AWAITS COPORATE EARNINGS RESULTS, ECONOMIC DATA AND “THE FED”

SOFR swap rates are ticking a touch lower this morning, particularly on the inflation-sensitive back end of the curve. A slight retreat in oil prices helped to nudge rates lower this morning. Overall, swap rates generally continue to track the direction of crude oil prices. We will see if tomorrow’s key CPI data is enough to steal some of the market spotlight away from the Middle East conflict.

US-IRAN WAR IMPACT: Key SOFR Swap Rate Movements Since the Onset of the US-Iran War  

• The 1-Year SOFR swap rate closed at 3.42% on Friday 2/27/2026 – it is currently trading at ~4.481%(+106.1 bps)

• The 2-year SOFR swap rate closed at 3.21% on Friday 2/27/2026 – it is currently trading at ~4.648%(+143.8 bps)

• The 3-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.688%(+146.8 bps)

• The 5-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.699%(+147.9 bps)

• The 10-year SOFR swap rate closed at 3.52% on Friday 2/27/2026 – it is currently trading at ~4.797%(+127.7 bps)

CHART 2:SOFR OIS Swap Rates – Prior 12-Months

Source: Bloomberg, LLP | 1Y (gold line), 2Y (violet), 3Y (orange), 5Y (blue) and 10Y (white) SOFR SWAP RATES; Year-To-Date 2026

CHART 2A:US Treasuries: Yield Overview – Prior 6-Months

Source: StreetStats | US Treasury Yields – Prior Six Months

RCA Product & Pricing Update:

Product Spotlight: What We Are Seeing in the Rates & Derivatives Markets

The market is once again facing tremendous uncertainty surrounding the path forward for interest rates. Borrowers should be as nimble as possible in this market environment. Cap purchasers should onboard as quickly as possible – there is no cost to onboard. It is important to be in a position to take advantage of market opportunities quickly and efficiently.

There is an increasing interest in exploring interest rate swaps as a possible hedge alternative. IR Swaps lock in a synthetic fixed rate and do not require an upfront premium. Unlike an interest rate cap, however, swaps are secured derivatives, so the counterparty selection process is more challenging with a swap. It is often challenging to place a swap away from the lender or incumbent relationship bank. There are also additional variables that factor into the decision to pursue an interest rate swap, or to unwind an existing swap. With the uptick in swap rates recently, we are also seeing an increase in swap termination requests. Please let us know if you would like to learn more about interest rate swaps, or swap terminations. RCA offers a full range of Derivative Advisory services.

Given the high-level of uncertainty surrounding forward rates, many clients are grappling with when or if to extend. This is a difficult question – our advice has been to monitor the market closely and be on-boarded and ready to trade, should the market move in your favor. We also advise borrowers to check the market pricing for extensions. Market price discovery is a key component to any cap transaction – new caps, extensions, or terminations.

We are still seeing some residual demand for interest rate floor indications – to offset high loan floors or simply to benefit from declining variable rates. Borrowers who have “floors” embedded in their loans have been considering purchasing a separate, stand-alone interest rate floor to offset the loan floor.

Interest Rate Cap Hub: Pricing & Volatility Update for 10/13/2026

• Current 1-Month SOFR = 3.92490% (Prior Day’s Reset: 3.92327%)

• Rate volatility dropped significantly last week as markets await data and the FOMC

• 1M SOFR continues to tick higher as markets anticipate tighter monetary policy going forward

• Market uncertainty surrounding the path forward for interest rates remains elevated

Cap Pricing Matrix:1-Month Term SOFR Cap Premiums: Week-On-Week

*Indications as of Market Open. Premium levels provided are indications only and subject to frequent change.

CHART 3:Historical Volatility: MOVE Composite US Treasury Yield Volatility Index - Year-To-Date 2026

Source: Bloomberg, LLP | HISTORICAL US TREASURY YIELD VOLATILITY, “MOVE” INDEX – YTD 2026

^NOTE:RATE MARKETS CAN BE VOLATILE - MARKET DYNAMICS AND PRICING CAN CHANGE VERY QUICKLY IN THIS MARKET ENVIRONMENT.

**WE RECOMMEND YOU CALL US FOR ACCURATE, UP-TO-THE-MINUTE CAP INDICATIONS.**

Please contact us if you would like to discuss an upcoming rate cap or rate cap extension, explore ways to reduce or eliminate escrow deposits for replacement caps or learn more about interest rate Caps, Floors, Swaps or Swaptions. RCA can also assist you with the voluntary early termination of your cap or swap.

HedgeWithAnEdge-TheRCAEdge!

Disclaimer: The information provided in this communication is intended for discussion purposes only. Nothing presented in this communication should be taken as a recommendation or forecast. All market data shown is indicative only and subject to change depending on current market conditions. The information in this publication is confidential and is intended for the recipient only.