Mixed PPI Data Curtails Rate Increase

Flash Update: US RATE MARKETS – FRIDAY NOVEMBER 13, 2026

• US Treasury yields and SOFR swap rates are mixed this morning after mainly “as expected” PPI data calmed jittery rate markets

• Short-end rates are down a couple of ticks this morning, while longer term rates are drifting a bp or two higher

• October PPI printed mainly as expected, but the current levels still point to elevated wholesale inflation

• Traders are staggering to the end of what has been one of the most volatile weeks for rates in years

• Odds for a 25 bp rate increase in December have increased to ~99.9%, Odds for a consecutive 25 bp rate hike in January have crept up to ~74%

• There is also mounting market speciation that the Fed may be tempted to raise rates 50 bps at the December meeting to decisively deal with rising inflation

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

• Next up for economic data: October Retail Sales prints Monday, 11/16 at 8:30 AM

• Performance in the AI-led tech sector will continue to be a major market theme as market participants and investors parse and digest the Nvidia situation – this is a developing story that I expect to continue to impact markets into next week

• 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 down ~1-2 bps this morning, depending on tenor

• Medium-term SOFR swap rates are up ~1-2 bps currently, depending on tenor

• Long-end SOFR swap rates are trading up ~1-3 bps this morning, depending on tenor

Good morning – US Treasury yields and SOFR swap rates are trading mixed this morning after a mostly “as expected” PPI print. It feels like traders are breathing a sigh of relief that PPI did not blow through expectations to the upside. That would likely have led to a continuation of the rate increases we have seen this week. Instead, the PPI data curtailed the pop in rates and gave traders some breathing room to regroup. A colleague of mine summed up this morning’s PPI reaction perfectly saying, “so, basically, you didn’t get hurt this morning, but it didn’t really help either”. Yep. Expect the inflation story, the price of crude oil and tech sector developments to remain front and center for markets as we head into next week. In my opinion, rates will remain biased to the upside for now – lower oil prices are the market’s best hope for lower sustained rates soon but right now, that result still seems far off.

Despite the mixed results we saw this morning, US wholesale inflation remained elevated in October, adding to evidence of mounting price pressures throughout the economy. Headline PPI rose 0.3% from a month earlier, slightly below expectations calling for a gain of 0.4%. Headline PPI rose 6.5% from a year earlier, the fastest annual pace in nearly four years. Core CPI, which excludes more volatile food and energy prices, rose 0.3% last month and increased 5% from October 2025. I think that today’s market reaction is more “relief” that PPI did not print significantly hotter-than-expected. I anticipate that fear of higher sustained inflation will remain a major concern for markets, at least until we see the October PCE data released on 11/25. (Note: We will also see GDP data released on the 25th.)

Next up for key economic data will be the release of October Retail Sales on Monday, 11/16 at 8:30 AM. The data will provide markets with fresh insight into the strength of consumer spending as we head into the holiday shopping season. Expectations for Monday’s Retail Sales are as follows: Retail Sales Advance MoM, 0.2% (vs. 0.8% the prior month); Retail Sales less Autos MoM, 0.4% (vs. 0.9% prior); Retail Sales less Autos & Gas MoM, 0.3% (vs. 0.2% prior).

CHARTS OF THE DAY:

A: PPI Recap: Mixed Data Halts Rate Increase…For Now

Source: BLOOMBERG, LLP | OCTOBER PPI RECAP

B: Swap Rates Surged This Week as Inflation Fears Roared Back to Life

Source: Bloomberg, LLP | 2Y ANNUAL OIS SOFR SWAP RATE – PRIOR 7 DAYS

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 ~1-2 bps. 5Y and 10Y SOFR swap rates are trading up ~1-2 bps this morning. The very back-end of the swap curve (20Y and 30Y) is currently trading up ~1-3 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: 9:15 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 MIXED AS MARKET DIGESTS PPI DATA; TRADERS REGROUP AFTER A LONG, VOLATILE WEEK

SOFR swap rates are mixed, but mostly higher this morning as traders digest the October PPI results. Although the data was mixed, the overall results point to continued price pressure in wholesale markets. That is likely to keep upward pressure on swap rates as we head into next week.

Rate markets will continue to grapple with myriad market forces. Uneven diplomatic efforts to end the war in Iran, fluctuations in crude oil prices, heightened equity market jitters, key economic data, and the changing US political landscape will all compete for the market’s attention in the near term. Prepare for increased levels of rate volatility in the coming weeks.

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 ~4.624% (+120.4 bps)

• The 2-year SOFR swap rate closed at 3.21% on Friday 2/27/2026 – it is currently trading at ~4.724% (+151.4 bps)

• The 3-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.721% (+150.1 bps)

• The 5-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.691% (+147.1 bps)

• The 10-year SOFR swap rate closed at 3.52% on Friday 2/27/2026 – it is currently trading at ~4.758% (+123.8 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 11/13/2026

• Current 1-Month SOFR = 3.95695% (Prior Day’s Reset: 3.92072%)

• Hot inflation data and higher oil prices pushed rates materially higher, leading to a significant increase in cap premiums this week

• Rate volatility has also spiked this week given the dramatic move in rates

• 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.

Hedge With An Edge - The RCA Edge!

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.