Rates Mostly Steady as Market Awaits Inflation Data

Flash Update: US RATE MARKETS – THURSDAY FEBRUARY 12, 2026

• UST yields and SOFR swap are holding mostly steady this morning as the market awaits inflation data

• Yesterday, rates moved higher after much better-than-anticipated January Employment Report results

• Traders continue to monitor geopolitical developments, though tensions have eased a bit recently

• Market participants will continue to monitor developments with the DOJ investigation into the US Central Bank

• A SCOTUS ruling on tariffs is now anticipated to come in February – the decision could come any day

• The next FOMC rate decision is due Wednesday, March 18, 2026 at 2:00 PM

• Next up for data: January CPI data prints tomorrow, 2/13 at 8:30 AM

• Short-end SOFR swap rates are trading flat to down ~1 bp this morning, depending on tenor

• Long-end SOFR swap rates are currently down ~1-2 bps, depending on tenor

Good Morning – US Treasury yields and SOFR swap rates are holding mostly steady this morning – maybe a tick lower on the back-end of the yield curve. Traders are waiting to see tomorrow’s January CPI release. Yesterday, a stronger-than-expected January Employment Report surprised the market and pushed rates higher. Traders are keen to see fresh inflation data, the other side of the Fed’s dual mandate.

Market participants will continue to track a number of potential market catalysts, but I think the primary focus for traders right now is seeing current economic and inflation data. Next up for key inflation data is the January CPI report, scheduled for release tomorrow, 2/13 at 8:30 AM. Market participants are eager to see what the latest consumer inflation data reveals. January CPI expectations are as follows: Headline MoM, 0.3% (vs. 0.3% the prior month); Core MoM, 0.3% (vs. 0.2% prior); Headline YoY, 2.5% (vs. 2.7% prior); Core YoY, 2.5% (vs. 2.6% prior).

Bottom line for me (right now): market participants and economists are eager to see if Chair Powell’s recent upbeat assessments of the economy, labor market and inflation outlook are accurate. The employment numbers we saw yesterday certainly provided some evidence that the US labor market started 2026 on the right foot. That said, some huge negative revisions to 2025 labor data still points to a softening US labor market, so I do not think traders have made any firm conclusions about the path forward for rates, or the FOMC. Stay tuned!

News the market is tracking includes:

• Geopolitical developments continue to weigh on market sentiment. Markets will continue to closely monitor the situations in Venezuela, Europe, Iran and Greenland. The current lull in geopolitical tensions has forced traders into a “wait and see mode”. Tensions have abated somewhat in recent days, but remain simmering just below the surface.

• Market participants will be tracking developments in the US equities markets closely. There is still a sharp focus on the performance of the growing AI sector. Market sentiment is likely to be impacted by “tech” earnings for the foreseeable future.

• The Supreme Court ruling on President Trump’s tariffs has not yet been released. The ruling is now expected to come this month. The SCOTUS ruling could definitely have market implications. Economists are unsure about the market impact of the decision – either way, the ruling is a potential catalyst for elevated rate volatility.

• SCOTUS is also currently ruling on the legality of the President firing of the Fed’s Lisa Cook. That ruling is also expected to come in the near term. Chair Powell said yesterday that this is “the most important legal case in the Fed’s history”. Stay tuned!

• The US Justice Department investigation into the US Central Bank and Chairman Powell is likely to remain a key market focus moving forward.

• Traders will continue to track developments with the US dollar – the recent weakness, and reaction of the US government, has baffled markets. Sustained currency weakness can be inflationary. A weak dollar can lead to “pricier” imports and a deterioration in investor confidence.

• Market participants are once again tracking US political developments, specifically with respect to budget negotiations. Traders are watching for signs of another potential government shutdown. As we have witnessed recently, government shutdowns can impact the timely release of economic data, which makes it difficult for traders to position.

Bottom-line, there are many potential market catalysts for traders to monitor and manage at the moment.

SOFR Swap Rate Summary: The 1Y SOFR swap rate is trading down ~1 bp this morning. 2Y and 3Y SOFR swap rates are currently trading down ~1 bp. 5Y and 10Y SOFR swap rates are currently trading down ~1-2 bps on the day. The very back-end of the swap curve is currently trading up ~1-2 bps from yesterday’s closing levels.

Please note: Market levels can change rapidly – rate cap premiums are subject to a dynamic market that can change frequently.

CHART 1:US RATES SNAPSHOT: 9:15 AM Eastern

*For SOFR Swap Rates & Change-On-Day (In Bps): Refer Two Far Right Columns (SOFR Swap Rates)

UST YIELDS | SWAP SPREADS | SOFR SWAP RATES

Source: Bloomberg, LLP | 9:15 AM NY Rates Snapshot

CHART 2 & 2A: SWAP RATES MOSTLY STEADY AS MARKET AWAITS CPI DATA

SOFR swap rates are holding mostly steady this morning as traders continue to monitor several potential market catalysts. Market participants are currently focused on the January CPI data scheduled for release tomorrow morning at 8:30 AM.

Should CPI come in under expectations, rates could drift lower – a drop in inflation would give the Fed more breathing room to cut rates if need be. A higher-than-expected CPI print could lead to an uptick in rates – the combination of strong economic data and sticky inflation is not conducive to rate cuts. You can see from the graphs below that the Fed-sensitive short-end of the curve has been more volatile recently than the long-end, which is less impacted by Fed rate decisions. That uptick in short-term rate volatility also denotes an increase in near-term uncertainty! I expect short-end rate vol to continue to outpace the long-end for the near term, as traders sort out Fed rate cut expectations.

CHART 2:Short-End SOFR Swap Rates – Prior 30 Days

Source: Bloomberg, LLP | 1Y (white), 2Y (blue) & 3Y (orange) SOFR SWAP RATES, PRIOR 30 DAYS

CHART 2A:Long-End SOFR Swap Rates – Prior 30 Days

Source: Bloomberg, LLP | 5Y (green), 7Y (purple) & 10Y (light blue) SOFR SWAP RATES, PRIOR 30 DAYS

RCA Product & Pricing Update:

Product Spotlight: What We Are Seeing In The Rates & Derivatives Markets

The market is 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.

Given the uncertainty that still remains about 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, similar to how you purchased the original cap. Market pricing discovery is a key component to any cap transaction – new caps, extensions or terminations.

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, swaps are secured derivatives, so the counterparty selection process is more challenging with a swap. There are also additional variables that factor into the decision to pursue an interest rate swap, or to unwind an existing swap. We are also seeing a dramatic increase in swap termination advisory requests recently, as clients contemplate refinancings. Lower rates have sparked refinancing activity, which in some cases necessitates unwinding an existing swap. Please let us know if you would like to learn more about interest rate swaps, or swap 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: Pricing & Volatility Update for 2/12/2026

• Cap premiums drifted higher yesterday on the strong employment data, but have been generally steady the past week or so

• Volatility remains relatively subdued; potential catalysts remain on the horizon

• Current 1-Month Term SOFR = 3.65964% (Prior day: 3.65997%)

Pricing Matrix:1-Week Movement In 1-Month Term SOFR Cap Premiums

*Premium levels provided are indications only and subject to change.

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.