Rates Steady, for Now, as Risk Off Sentiment Lingers

Flash Update: US RATE MARKETS – FRIDAY OCTOBER 30, 2026

• US Treasury yields and SOFR swap rates are mostly steady as a “risk off” sentiment grips the market

• Yesterday, rates moved materially lower on disappointing tech earnings, which sparked a fresh flight to quality

• We may see the flight to quality extend into today should equities open materially lower – rates likely biased lower today

• The price of Brent crude oil advanced to ~$117 on fears the US may be preparing for fresh military strikes

• Higher oil prices may help to hold rates in check despite the risk off sentiment currently gripping the rate markets

• September ECI printed as expected this morning at 0.8%, signaling US employment costs remain relatively contained

• Focus is likely to shift, at least temporarily, to next week’s highly anticipated US mid-term elections

• The next FOMC rate decision is due on December 9th at 2:00 PM

• Based on Chair Warsh’s ambiguous message this week, odds for a 25 bp rate increase in December have declined to ~72.4%

• Short-term SOFR swap rates are trading flat to up ~1 bp this morning, depending on tenor

• Medium-term SOFR swap rates are down ~1 bp currently, depending on tenor

• Long-end SOFR swap rates are trading down ~1-2 bps this morning, depending on tenor

Good morning – US Treasuryyields and SOFR swap rates are mostly steady this morning, as a risk off sentiment grips the market. Right now, AI led tech “jitters” and the price of crude oil are competing for the market’s attention. Yesterday, weak tech earnings sparked a renewed flight to quality and pushed rates materially lower. Overall, Treasury yields are down ~40 basis points across the curve in October, which would be the first monthly decline for Treasury yields since February. I expect the market’s attention on the tech sector to continue for the near term. Rates are likely to be biased lower today after the equity markets open.

Traders are also closely monitoring developments in the Middle East. Brent crude advanced to $117 a barrel this morning, following a report that the US may resume military strikes on Iran after next week’s midterm elections. Crude oil price movement continues to complicate the inflation outlook, with Brent crude hovering at its highest level since early May.

Market participants are also bracing for next week’s highly anticipated US mid-term elections. There is wide speculation that we may see a very different policy environment after the elections, should Republicans lose their majority. We may be in for a potentially volatile ride in the stock and bond markets with artificial intelligence oversight, defense spending, and crypto legislation all on the table.

CHART OF THE DAY:

A: 10Y US Treasury Yields Track Tech Performance Closely

Source: Bloomberg, LLP | US 10Y TREASURY YIELD VS. NASDAQ 100 INDEX SINCE JULY 2026

SOFR Swap Market - Quick Summary:

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

“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.

• 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. Warsh’s vague and ambiguous press conference on Wednesday confused markets and are likely to lead to increase volatility.

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

CHART 1:US RATES SNAPSHOT: 9:15 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 | 9:15 AM NY Rates Snapshot

CHART 2 & 2A: SOFR SWAP RATES STEADY AS RISK OFF SENTIMENT PERMEATES GLOBAL MARKETS

SOFR swap rates are holding mostly steady this morning as a global risk off sentiment lingers. Weak tech earnings spurred a renewed flight to quality yesterday as traders sought safe haven, leading to materially lower rates. AI jitters are likely to continue into next week, which could keep the bias toward lower rates. However, the market is facing a huge event next week – the US mid-term elections. Next week is shaping up to be a potentially volatile week for rates!

AI performance jitters, the direction of oil prices and the US mid-terms are likely to compete for the market’s attention in the near term.

Market uncertainty, and volatility, are likely to remain elevated for the near term.

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 ~4.374%(+95.4 bps)

• The 2-year SOFR swap rate closed at 3.21% on Friday 2/27/2026 – it is currently trading at ~4.457%(+124.7 bps)

• The 3-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.461%(+124.1 bps)

• The 5-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.451%(+123.1 bps)

• The 10-year SOFR swap rate closed at 3.52% on Friday 2/27/2026 – it is currently trading at ~4.374%(+85.4 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 ANNUAL OIS 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: Cap Pricing & Rate Volatility Update for 10/30/2026

• Current 1-Month SOFR = 3.91403% (Prior Day’s Reset: 3.92987%)

• Cap premiums have materially dropped as SOFR swap rates decrease

• Rate volatility has continued to drift lower despite elevated market uncertainty

• The drop in implied volatility is also helping to alleviate pressure on cap premiums

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.