Rates Dip as Markets Digest Stunning Midterm Election Results

Flash Update: US RATE MARKETS – WEDNESDAY NOVEMBER 4, 2026

• US Treasury yields and SOFR swap rates are a touch lower this morning as markets digest the stunning results of the US midterm elections

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

• Next up for key economic data: The October Employment Report prints Friday 11/6 at 8:30 AM

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

• Odds for a 25 bp rate increase in December are holding relatively steady at ~79.3% this morning

• Short-term SOFR swap rates are trading down ~1-5 bps this morning, depending on tenor

• Medium-term SOFR swap rates are down ~4-5 bps currently, depending on tenor

• Long-end SOFR swap rates are trading up ~2-4 bps this morning, depending on tenor

Good morning – US Treasury yields and SOFR swap rates are moving lower this morning as markets digest the stunning US midterm election results. A Democratic sweep of Congress rippled across global markets on expectations of greater limits to President Trump’s agenda. US Democrats swept into power in Congress, with outrage over the cost of living and the war in Iran leading to a rebuke of President Donald Trump and his party. Democrats won at least 228 House seats and will hold at least 54 seats in the Senate. The election results leave President Trump far more hemmed in than he was in the first two years of his second term, with Democrats set to prioritize oversight of the President and his allies, as well as focus on policymaking, especially on affordability issues, geopolitics and the growing US deficit.

There is, however, optimism that the election results could lead to more bipartisan efforts to deal with some of the US’s most glaring issues. In an interview with the New York Times, President Trump said, “I am absolutely willing to accept those results”. He added: “We’ll work with the Democrats, and we’ll, you know, look forward to working with them. We’ll probably work something out.” It will be very interesting to see how this situation plays out in the coming weeks and months. It is far too early to draw any concrete conclusions on the direction of US policy, and US interest rates.

Next up, traders are likely to temporarily shift focus to the Employment Report due Friday at 8:30 AM. The jobs report could provide more clarity on the direction of monetary policy for the remainder of the year. Right now, odds for a monetary policy shift in December still favor a 25 bp rate hike (79.3%). The price of crude oil and developments in the Middle East will continue to garner the market’s attention in the near term.

CHARTS OF THE DAY:

A: US Midterm Election Results – US Senate

Source: CNBC | US MIDTERM ELECTION RESULTS – US SENATE SUMMARY

B: Swap Rates Volatile but Hold Near Pre-Election Levels

Source: BLOOMBERG, LLP | 2Y SOFR SWAP RATE – PRIOR 48 HOURS

SOFR Swap Market - Quick Summary:

• The 1Y SOFR swap rate is trading down ~1-3 bps this morning. 2Y and 3Y SOFR swap rates are currently trading down ~4-5 bps. 5Y and 10Y SOFR swap rates are trading down ~4-5 bps this morning. The very back-end of the swap curve (20Y and 30Y) is currently trading down ~2-4 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. 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 will now shift focus to the policy and economic ramifications of the US midterm elections. The market’s reaction, and “direction”, are likely to play out in the coming weeks.

• 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. Yesterday’s election results likely only complicate the discussion.

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 DROP AS MARKETS DIGEST STUNNING US MIDTERM ELECTION RESULTS

SOFR swap rates are lower this morning as markets digest the stunning US midterm election results. Lower oil prices and speculation about a US policy shift are the main catalysts for lower rates this morning. There is also speculation that the US may seek a swift end to the conflict in the Middle East, which may help further reduce oil prices, decrease risk premiums, and lower rates. It is far too early to draw any concrete conclusions from yesterday’s election results, but it is clear the US will be operating under far different administrative, legislative and policy environments going forward.

Given the “unknown” of what is next for US politics, 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 ~4.389% (+96.9 bps)

• The 2-year SOFR swap rate closed at 3.21% on Friday 2/27/2026 – it is currently trading at ~4.452% (+124.2 bps)

• The 3-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.444% (+122.4 bps)

• The 5-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.428% (+120.8 bps)

• The 10-year SOFR swap rate closed at 3.52% on Friday 2/27/2026 – it is currently trading at ~4.528% (+100.8 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 11/4/2026

• Current 1-Month SOFR = 3.90361% (Prior Day’s Reset: 3.90274%)

• Cap premiums have declined recently as SOFR swap rates decreased

• 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.