Rates Tick Higher as Traders Digest Midterm Election Results and Brace for Key Jobs Data Due Tomorrow Morning

Flash Update: US RATE MARKETS – THURSDAY NOVEMBER 5, 2026

• US Treasury yields and SOFR swap rates are a touch higher this morning as markets digest the 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

• Traders are also bracing for tomorrow’s highly anticipated October Employment Report, due at 8:30 AM

• The October jobs data may have direct implications for near-term monetary policy

• Next up for key economic data: The October Employment Report prints tomorrow, 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 ~80.9% (vs. 79.3% yesterday)

• Short-term SOFR swap rates are trading up ~2-4 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 bp this morning, depending on tenor

Good morning – US Treasury yields and SOFR swap rates are moving a touch higher this morning as markets continue to digest the US midterm election results. Traders will be looking to the US payrolls report due Friday for more insight on the path forward for the economy and interest rates. Markets are still pricing an ~80.9% likelihood of a 25 basis-point Fed hike next month, followed by one more in 2027. Fed officials Hammack and Barkin are scheduled to speak later today.

While markets are banking on a swifter resolution to the US-Iran war than was anticipated prior to the US midterm elections, they remain focused on the risk that energy prices pose for inflation for as long as the conflict remains unresolved. A 25 bp rate hike by the BOE this morning underscored the very real inflation risk global economies are facing because of high energy prices. Barring a collapse in the equity markets, I do not see a catalyst for materially lower rates until oil prices are reduced dramatically.

Traders are now bracing for the October Employment Report, due tomorrow 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 (80.9%). Expectations for tomorrow’s jobs data are as follows: Change in Non-Farm Payrolls, 65k (vs. 29k the prior month); Change in Private Payrolls, 64k (vs. 46k prior); Average Hourly Earnings YoY, 2.9% (vs. 3.0% prior); Unemployment Rate, 4.2% (unchanged from prior). If the employment report results match expectations, it will signal the US jobs market remains solid, and it will provide some breathing room for the Fed to raise rates in December. A weak jobs report is likely to cause the Fed to contemplate another “hold” at the next meeting.

CHART OF THE DAY:

A: Global Central Banks Still Focused on Inflation  

Source: BLOOMBERG, LLP | BOE, FOMC, ECB - MONETARY POLICY MOVES SINCE 2019

SOFR Swap Market - Quick Summary:

• The 1Y SOFR swap rate is trading up ~2-3 bps this morning. 2Y and 3Y SOFR swap rates are currently trading up ~2-4 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 bp 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 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 TICK HIGHER AS MARKETS DIGEST US MIDTERM ELECTION RESULTS, BRACE FOR EMPLOYMENT DATA

SOFR swap rates are a touch higher this morning as markets digest the US midterm election results and brace for tomorrow’s release of the October Employment Report. It is far too early to draw any concrete conclusions from the midterm election results, but it is clear the US will be operating under far different administrative, legislative and policy environments going forward. We are seeing a small rotation from bonds to stocks post-elections, which is also contributing to slightly higher swap rates this morning.

Near term, the market’s focus will shift to the October jobs report due tomorrow morning, which is likely to have implications to the direction of monetary policy.

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 ~4.411% (+99.1 bps)

• The 2-year SOFR swap rate closed at 3.21% on Friday 2/27/2026 – it is currently trading at ~4.478% (+126.8 bps)

• The 3-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.466% (+124.6 bps)

• The 5-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.433% (+121.3 bps)

• The 10-year SOFR swap rate closed at 3.52% on Friday 2/27/2026 – it is currently trading at ~4.518% (+99.8 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 11/5/2026

• Current 1-Month SOFR = 3.90606% (Prior Day’s Reset: 3.90361%)

• Cap premiums have declined recently as SOFR swap rates have decreased

• Rate volatility has settled down as markets contemplate the path forward for interest rates and await a new US political landscape

• The dip is volatility is also helping to lower cap premiums, particularly two- and three-year tenor caps

• 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.