Rates Hold Steady Despite Softer-Than-Expected PPI Data

Flash Update: US RATE MARKETS – TUESDAY APRIL 14, 2026

• UST yields and SOFR swap rates are holding mostly steady this morning, despite softer-than-expected March PPI results

• Although March PPI results beat expectations, the MoM and YoY run-rates are moving in the wrong direction

• Market participants are carefully monitoring “war developments”; The first round of US/Iran negotiations held this past weekend ended in a deadlock, prompting the US to blockade the Strait of Hormuz

• Both the US and Iran are weighing further negotiations to extend the ceasefire

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

• The US/Iran war 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 Retail Sales data will be released on Tuesday, 4/21 at 8:30 AM

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

• Medium-term SOFR swap rates are flat to up ~1 bp currently, depending on tenor

• Long-end SOFR swap rates are flat to up ~1 bp this morning, depending on tenor

Good Morning – US Treasury yields and SOFR swap rates are holding mostly steady this morning, despite softer-than-expected March PPI results. I think the muted rate response this morning stems primarily from the fact that, although PPI beat expectations, the MoM and YoY run rates are higher than the Fed and the market would like to see. Yes, inflation has not yet spiked dramatically, but the recent data trend and high energy prices still point to higher inflation. Market participants also remain laser focused on war developments, which is also helping to mute the “normal” impact of economic data. I also think that there is still a high level of optimism in the market that the US/Iran war will be diplomatically resolved in the near future. That is also helping to dampen the market response to the data this morning.

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. However, the US move to blockade the Strait of Hormuz has led to Iranian threats to “retaliate”. That said, both sides are weighing further negotiations to extend the ceasefire. Despite the ceasefire arrangement, uncertainty surrounding the outcome of the war remains elevated. For me it’s still the same bottom-line: progress on the diplomatic front will likely push interest rates lower and calm volatility – conversely, should diplomatic efforts prove fruitless or drag-on indefinitely, interest rates are likely to continue to push higher and volatility will remain elevated. Right now, as the war goes, so go rates.

Prepare for the possibility of “whip-saw” rate movements as 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 an d will change quickly as war “developments” unfold. It may take a few weeks for volatility to completely 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 flat to up ~1 bp this morning. 2Y and 3Y SOFR swap rates are currently trading flat to up ~1 bp. 5Y and 10Y SOFR swap rates are trading flat to up ~1 bp on the day. The very back-end of the swap curve is currently trading flat to up ~1 bp 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 MOSTLY STEADY DESPITE SOFTER-THAN-EXPECTED MARCH PPI DATA

SOFR swap rates are holding mostly steady this morning, as the market largely ignored a better-than-expected March PPI result. The muted swap market response to the PPI result stems from the fact that traders continue to be laser focused on war developments. The war continues to be the market’s main focus.

We could be subject to elevated levels of rate volatility as the diplomatic/negotiation process unfolds. I still believe that, should a “real” resolution be reached relatively quickly, we could see rates drop to pre-war levels, 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. We are seeing a perfect example of that “war resumption impact” today with slightly higher swap rates.

Key Swap Rate Movements Since The US/Iran 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 rate has experienced a similar move – it closed Friday 2/27 at 3.52% and is currently trading at ~3.86% (+34 bps).

CHART 2:Short-End SOFR Swap Rates – Since 3/4/2026

Source: Bloomberg, LLP | 1Y (white), 2Y (blue) & 3Y (orange) SOFR SWAP RATES, SINCE MARCH 4, 2026

CHART 2A:Long-End SOFR Swap Rates – Since 3/4/2026

Source: Bloomberg, LLP | 5Y (green), 7Y (purple) & 10Y (light blue) SOFR SWAP RATES, SINCE MARCH 4, 2026

CHART 2B:10-Year US Treasury Note Yield Since October 2025

Source: StreetStats | 10-Year US Treasury Note Yield Prior 6-Months

CHART 3: MARCH PPI RECAP

US wholesale prices rose by less than expected in March, despite a surge in energy costs tied to the Iran war. Headline PPI rose 0.5% in March, after a revised 0.5% increase in February. The most positive news was that Core PPI, which excludes food and energy, rose just 0.1% in March, beating estimates calling for a 0.4% increase. The YoY PPI data also came in under expectations: Headline YoY PPI posted at 4.0% (vs. 4.6% expected) and Core YoY CPI printed at 3.8%, below expectations calling for 4.1%.

The PPI data follows figures from last week that showed US consumer prices (CPI) surged in March because of skyrocketing gasoline prices, even as underlying inflation came in below estimates. While the initial “war” impact for consumers has been largely limited to energy, businesses may face higher costs for a wide range of industrial inputs from war-related disruptions in production and shipping in the months ahead. Overall, market participants are still very worried about higher near-term inflation.

CHART 3:March PPI Recap – PPI Beats Expectations But Inflation Fears Remain Elevated

Source: Bloomberg, LLP | MARCH PPI 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 4/14/2026

• 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 since last week

• Cap premiums have moved lower given the recent decline in rate volatility and a slight drop in SOFR swap rates

• Current 1-Month Term SOFR = 3.65471% (Prior day: 3.64863%)

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.