Rates Drift Slightly Higher, but Traders Mostly Ignore Hot March CPI Print

Flash Update: US RATE MARKETS – FRIDAY APRIL 10, 2026

• UST yields and SOFR swap rates are ticking a touch higher as traders anxiously monitor war developments

• Traders mostly ignored a hot March CPI print; Gasoline prices were the primary culprit behind the increase in CPI

• Traders continue to grapple with a range of possible outcomes for the war in the Middle East

• The war in the Middle East remains the primary focus for the rate markets

• The next FOMC rate decision is due Wednesday, April 29th at 2:00 PM

• Next up for data: March PPI is released on Tuesday, 4/14 at 8:30 AM

• Short-term SOFR swap rates are trading up ~1-2 bps this morning, depending on tenor

• Medium-term SOFR swap rates are up ~1-3 bps currently, depending on tenor

• Long-end SOFR swap rates are up ~2-3 bps this morning, depending on tenor

Good Morning – US Treasury yields and SOFR swap rates are drifting higher this morning, despite a hotter-than-expected March CPI print. I initially thought rates would have increased materially after the hot CPI print this morning, but that was not the case. My suspicion is that market pricing has already accounted for the war-related inflation risk – basically, higher inflation is already priced into the curve. There is also a lingering market sentiment that the pop in inflation may be temporary, and should begin to soften as the war is resolved and energy markets stabilize.

The market will continue to be heavily “headline” driven – there are many, many rumors swirling around the market regarding how much progress is being made with diplomatic efforts to end the war. Thus far, the fragile ceasefire is holding, which is generally keeping the rate markets fairly subdued for the moment. This feels like a key crossroads for traders, so it is likely they are simply pausing to monitor developments before adjusting rates again. Continued progress on the diplomatic front will likely push rates lower – conversely, should diplomatic efforts prove fruitless, rates are likely to continue to push higher.

Prepare for the possibility of whip-saw rate movements as the negotiations between the US and Iran unfold – or conversely, if they do not unfold. Either development is likely to increase rate volatility. War developments and the associated “headlines” will continue to be the primary market catalysts for the near term.I advise staying nimble if you have upcoming caps or swaps to execute – market dynamics can and will change quickly as war “developments” unfold. It may take a few weeks for volatility to settle down and level-off. For the time being, market participants will continue to anxiously monitor the latest war developments.

News the market is tracking includes:

• Geopolitical developments continue to weigh on market sentiment.The US/Iran “war” continues to dominate market sentiment this week. The end result of the US attack on Iran is difficult to forecast at this time.

• SCOTUS is also currently ruling on the legality of the President firing of the Fed’s Lisa Cook. There are some reports stating that SCOTUS is nearing a final decision on that case, which could have far reaching implications for the US Central Bank.

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

• Market participants continue to closely track developments in the US equities markets. 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 market continues to monitor US political developments. US political developments will remain a major focus for the market for the foreseeable future.

• Traders and investors continue to assess the market implications of the recent SCOTUS ruling on President Trump’s tariffs. Market participants await more data and information.

• Market participants are growing more and more concerned with the ongoing “partial” government shutdown. Traders are hoping the situation is resolved quickly – a full government shut-down would be extremely challenging to manage during a war.

SOFR Swap Rate Summary: The 1Y SOFR swap rate is trading up ~1 bp this morning. 2Y and 3Y SOFR swap rates are currently trading up ~1-2 bps. 5Y and 10Y SOFR swap rates are trading flat to up ~1-3 bps on the day. The very back-end of the swap curve is currently trading up ~2-3 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: 9:30 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 | 9:30 AM NY Rates Snapshot

CHART 2, 2A, 2B & 2C: SOFR SWAP RATES TICK HIGHER ON HOT MARCH CPI PRINT

SOFR swap rates are ticking slightly higher this morning, particularly on the back-end of the curve, due to a hotter-than-expected March CPI print. There is a palpable sentiment in the market that a diplomatic solution will happen. As such, traders are pausing here and waiting for the next development.

We could be subject to elevated levels of rate volatility as the diplomatic/negotiation process unfolds. That, of course, presumes that Iran will capitulate and sit down at the negotiating table. I still believe that, should a “real” resolution be reached quickly, we could see rates drop, potentially quickly and dramatically, as the energy and rate markets correct. However, make no mistake – should negotiations collapse, or lead nowhere, the conflict could ramp up again and reach a new level of intensity. In that case, there is plenty of room for rates to move higher from here.

Key Swap Rate Movement Since The War Began:The 2-year SOFR swap rate closed at 3.21% on Friday 2/27 – it is currently trading at ~3.61% (+40 bps). The 5-year SOFR swap rate closed at 3.22% on Friday 2/27 – it is currently trading at ~3.61% (+39 bps). The 10-year SOFR swap rates has experienced a similar move – it closed Friday 2/27 at 3.52% and is currently trading at ~3.855% (+33.5 bps).

CHART 2:Short-End SOFR Swap Rates – Since 3/2/2026

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

CHART 2A:Long-End SOFR Swap Rates – Since 3/2/2026

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

CHART 2B:US Treasury Yield Curve – Change Since March 10, 2026

Source: StreetStats | US Treasury Yield Curve – Today vs. March 10, 2026

CHART 3: MARCH CPI RECAP

US consumer inflation surged in March by the most in nearly four years as the war with Iran sent gasoline prices skyrocketing. Headline CPI rose 0.9% from February, according to the data released this morning. From a year ago, CPI picked up to 3.3%, the strongest pace since 2024. A record increase in gas prices was responsible for nearly three-quarters of the monthly advance.

As I mentioned earlier in the update, I think traders have mostly priced in the “war” inflation risk. With the ceasefire currently underway, traders are likely to pause here before adjusting rates either way. That said, I do not think anyone is ready to price in a Fed rate hike as their next move – there is still the underlying hope a diplomatic solution is coming in the near future. Energy related market dislocations are typically transient and reverse quickly once things settle down. I sense that is still the underlying market sentiment.

CHART 3: March CPI Recap – Traders Mostly Ignore Hot CPI Print

Source: Bloomberg, LLP | MARCH CPI RECAP

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 4/10/2026

• Cap premiums are fluctuating as rates bounce around in reaction to diplomatic efforts to end the war

• Rate volatility has ticked significantly higher since the onset of the Middle East conflict, but has settled down a touch this week

• Cp premiums have moved lower this week given the drop in volatility and a slight drop in rates

• 2Y SOFR swap rates began the week at 3.676% and are currently trading at ~3.607%

• Current 1-Month Term SOFR = 3.65178% (Prior day: 3.65832%)

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

*Indications as of market open. Premium levels provided are indications only and subject to change.

^NOTE: 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.