Markets Brace for US Midterm Election Results

Flash Update: US RATE MARKETS – TUESDAY NOVEMBER 3, 2026

• US Treasury yields and SOFR swap rates are holding mostly steady this morning, as markets brace for the US midterm election results
• The results of the US midterms may have significant US policy ramifications, which in turn may impact the outlook for interest rates
• The next FOMC rate decision is due on December 9th at 2:00 PM
• The October JOLTS jobs report prints this morning at 10:00 am, kicking off an important week for US labor market data
• Next up for key economic data: The October Employment Report prints Friday 11/6 at 8:30 AM
• Odds for a 25 bp rate increase in December are holding steady at ~76.9% this morning
• Short-term SOFR swap rates are trading down ~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 up ~1 bp this morning, depending on tenor

Good morning – US Treasury yields and SOFR swap rates are mostly steady this morning as rate markets brace for the results of the highly anticipated US midterm elections. Overall, rates are struggling for direction as traders held back from adding risk after voting got underway in the midterm elections. Brent crude fluctuated as traders weighed the prospects for a peace deal in the Middle East. Iranian President Pezeshkian said Iran’s supreme leader granted negotiators authority to talk about issues he had previously deemed non-negotiable, providing some renewed optimism the two sides may be headed back to the negotiating table.

Traders will also be keeping one eye on the latest JOLTS job openings report, due today at 10:00 AM, the first in a slate of releases this week on the state of US employment. The JOLTS report is expected to come in slightly better-than-expected, signaling the US job market remains on solid footing.

Overall, the big show today is the US midterm elections. Although polls and pundits are calling for a sweeping victory by the Democrats, that outcome remains far from certain. We may be in for “more of the same” for the next two years, or we may be facing a major change in how US policy is shaped over the next two years. My short take is that a continuation of a Republican majority portends higher rates, whereas a win by the Democrats sets the stage for lower rates as US policy shifts once again. I am also going to assume that today’s elections are orderly and that the results will be certified quickly. That said, there is no guarantee that happens – should the results be “tied up in court” or outright disputed, uncertainty will rise and so will rates. The US risk premium is likely to skyrocket in that scenario. Stay tuned!

CHARTS OF THE DAY:

A: Markets Brace for US Midterm Election Results

Source: Bloomberg, LLP | KALSHI US MIDTERM ELECTIONS OUTCOME PROBABILITIES

B:  Crude Oil Decline Short-Lived as Middle East Tensions Rise

Source: Bloomberg, LLP | PRICE OF BRENT CRUDE OIL, NOVEMBER 2026

SOFR Swap Market - Quick Summary:

• The 1Y SOFR swap rate is trading down ~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 flat to down ~1 bp this morning. The very back-end of the swap curve (20Y and 30Y) is currently trading flat to up ~1 bp 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. 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. Warsh’s vague and ambiguous press conference last week confused markets and is likely to lead to increase volatility.
• Market participants are laser focused on the results of the US midterm elections, and the potential US policy implications.
• 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.

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 STEADY AS TRADERS BRACE FOR THE US MIDTERMS; CRUDE OIL PRICES REMAIN IN FOCUS

SOFR swap rates are holding mostly steady this morning as traders brace for the results of the US midterm elections. Market participants and investors are likely to proceed cautiously as the results of the elections unfold today. Traders are also keeping one eye on developments in the Middle East. Although there was some positive news out of the Middle East overnight, fears of renewed US-Iran hostilities were enough to nudge oil prices higher this morning. That lead to an initial uptick in rates early this morning – rates have eased back down a few bps as the morning has progressed and are now down ~1 bp on the short end. Long end swap rates are up ~1 bp on higher oil prices. The other event rate markets will be watching today is the JOLTS jobs report due for release this morning at 10:00 AM.

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 ~4.377% (+95.7 bps)
• The 2-year SOFR swap rate closed at 3.21% on Friday 2/27/2026 – it is currently trading at ~4.448% (+123.8 bps)
• The 3-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.445% (+122.5 bps)
• The 5-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.429% (+120.9 bps)
• The 10-year SOFR swap rate closed at 3.52% on Friday 2/27/2026 – it is currently trading at ~4.529% (+100.9 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 11/3/2026

• Current 1-Month SOFR = 3.90274% (Prior Day’s Reset: 3.90321%)
• Cap premiums have declined recently as SOFR swap rates decreased
• Rate volatility has drifted higher as we approach the midterm elections
• Market uncertainty surrounding the path forward for interest rates remains elevated

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

Notional Amount	Tenor	Strike Rate	~Cap Premiums 10/27/26	~Cap Premiums 11/3/26 Open*
,$25,000,000	1-Year	3.50%	~$241k	~$223k
$25,000,000	1-Year	4.50%	~$74k	~$64k
$25,000,000	2-Year	3.50%	~$554k	~$510k
$25,000,000	2-year	4.50%	~$228k	~$202k
$25,000,000	3-Year	3.50%	~$868k	~$803k
$25,000,000	3-Year	4.50%	~$410k	~$371k

*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.

John Kautz

Rate Cap Advisors | AST Defeasance | Interest Rate Hedging Solutions

Direct: 646.400.0616

Email: jkautz@ratecaps.com

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