Rates Higher on Hot CPI Print, Hawkish Fed Comments

Flash Update: US RATE MARKETS – TUESDAY NOVEMBER 10, 2026

• US Treasury yields and SOFR swap rates jumped higher this morning after a hot October CPI print and hawkish comments from the Fed’s Waller

• CPI results showed another firm advance in consumer prices in October, increasing the likelihood for a 25 bp Fed rate hike in December

• On a positive note, Brent Crude oil dipped below $90 a barrel for the first time since August

• A sustained dip in crude oil prices should begin to alleviate the inflations concerns that have plagued markets for months

• Equity markets have stabilized for the time being, but pressure continues to mount on the AI-led tech sector – this is likely to be a main market theme for the foreseeable future

• With this morning’s rate move, odds for a 25 bp rate increase in December have shot up to ~98.8%

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

• Next up for economic data: October PPI prints on Friday, 11/13 at 8:30 AM

• The results of the US midterm elections are likely to have significant US policy ramifications, which in turn could impact the outlook for interest rates

• Short-term SOFR swap rates are trading up ~14-18 bps this morning, depending on tenor

• Medium-term SOFR swap rates are up ~9-17 bps currently, depending on tenor

• Long-end SOFR swap rates are trading up ~5-7 bps this morning, depending on tenor

Good morning – US Treasury yields and SOFR swap rates are higher this morning after a hot October CPI print and hawkish comments from the Fed’s Waller. Markets are largely ignoring lower oil prices this morning to focus on the inflation data and implications for the December Fed rate decision.

Brent crude oil sank below $90 per barrel for the first time since August. This is a positive development that I think will get more attention once the inflation furor calms down. I also feel that the dip in oil prices may help to keep rates in check. I think this morning’s rate increase mainly reflects traders fully pricing in a 25 bp December rate hike. I also believe traders will be cautious to take rates materially higher from here, given the improving outlook for a resolution to the conflict in the Middle East. Yes, we have a long way to go and it may take months, but continued progress is likely to lead to lower oil prices and reduced fear of higher inflation.

Market implied odds for a 25 bp rate hike in December have surged to 98.8% due mainly to the hot CPI data and Waller’s very hawkish comments. Traders are currently calling for at least two Fed hikes by mid-2027 and have started to price in a small chance of a jumbo-sized half-point move in December. 

This morning, the Fed’s Waller said, “if, as I expect, the monthly rate of inflation improves in October, I am leaning toward supporting an increase in our policy rate of 25 basis points.” He added an even more hawkish qualification saying, “but if the October CPI inflation data out later today are similar to the past two monthly readings — with core CPI inflation around 0.3% or even higher — then a stronger policy move may be needed” (read: a 50 bp rate hike).

Core CPI, which excludes food and energy prices, rose 0.3% in October from a month earlier (vs. 0.2% expected). Headline CPI climbed 0.4%, vs. expectations calling for an increase of 0.3%. As I noted yesterday, the BLS did not publish year-over-year changes because data collection was interrupted last year during the government shutdown. Traders will now look ahead to the release of October PPI on Friday.

CHARTS OF THE DAY:

A: Hot CPI Print Portends December Fed Rate Hike

Source: BLOOMBERG, LLP | CURRENT FED POLICY ADJUSTMENT EXPECTATIONS THROUGH DECEMBER 2027

B:  October CPI Prints Hotter-Than-Expected

Source: Bloomberg, LLP | OCTOBER CPI RECAP

C: Short-End Treasury Yields Jump on Hot CPI Data

Source: Bloomberg, LLP | 2Y UST YIELD - TWO-DAY CHART

SOFR Swap Market - Quick Summary:

• The 1Y SOFR swap rate is trading up ~17-18 bps this morning. 2Y and 3Y SOFR swap rates are currently trading up ~14-17 bps. 5Y and 10Y SOFR swap rates are trading dup ~9-13 bps this morning. The very back-end of the swap curve (20Y and 30Y) is currently trading up ~5-7 bps from yesterday’s closing levels.

“Key News” the market is tracking includes:

• Geopolitical developments will continue to weigh on markets. Developments in the US/Iran “war”, and the direction of crude oil prices, 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. FOMC Chair Warsh’s vague and ambiguous press conference last week confused markets and is likely to lead to increase volatility as we approach the next Fed meeting.

• Market participants will now shift focus to the policy and economic ramifications of the US midterm elections.

• Traders are also focused on the performance of the 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.

CHART 1: US RATES SNAPSHOT: 9:45 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 | 9:45 AM NY Rates Snapshot

CHART 2 & 2A: SOFR SWAP RATES MATERIALLY HIGHER ON HAWKISH FED COMMENTS, HOT CPI PRINT

SOFR swap rates shot higher this morning after a hot CPI print and hawkish comments from the Fed’s Waller. Waller said he favors a rate hike in December and perhaps more than a 25 bp hike. Waller’s comments and the hot CPI data were more than enough the push rates higher this morning and to increase the odds for a December FOMC rate hike.

Rate markets will continue to grapple with myriad market forces. Diplomatic efforts to end the war in Iran, lower oil prices, equity market jitters, key economic data, and the changing US political landscape will all compete for the market’s attention in the near term.

It is far too early to draw any concrete conclusions from the US midterm election results, but it is clear the US will be operating under far different administrative, legislative and policy environments going forward. Stay tuned!

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 ~4.536% (+111.6 bps)

• The 2-year SOFR swap rate closed at 3.21% on Friday 2/27/2026 – it is currently trading at ~4.584% (+137.4 bps)

• The 3-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.560% (+134.0 bps)

• The 5-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.519% (+129.9 bps)

• The 10-year SOFR swap rate closed at 3.52% on Friday 2/27/2026 – it is currently trading at ~4.583% (+106.3 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 11/10/2026

• Current 1-Month SOFR = 3.91838% (Prior Day’s Reset: 3.89748%)

• This morning’s jump in rates and uptick in volatility will push cap premiums materially higher this morning

• 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.

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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.