Rates Edge Lower as Traders Digest Ceasfire Extension and Assess War Outlook

Flash Update: US RATE MARKETS – WEDNESDAY APRIL 22, 2026

• UST yields and SOFR swap rates are drifting a touch lower this morning, as traders anxiously monitor the latest US/Iran war developments

• President Trump extended the existing ceasefire indefinitely to allow Iran time to formulate a “unified proposal”

• The extension of the ceasefire is positive news, but the uncertain “go forward” plan and ambiguous timetable for negotiations are leading to increased market uncertainty surrounding the ultimate outcome of the war

• That said, market participants remain, overall, relatively optimistic that a “longer-term” peace plan can be achieved in the near-term

• 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

• Fed officials will be subject to the pre-meeting communications blackout until April 30, 2026

• The next time we hear from a Fed official will be Chairman Powell’s post-meeting press conference on 4/29 at 2:30 pm

• Confirmation hearings for the next FOMC Chairman are underway; Markets are paying attention!

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

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

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

Good morning – US Treasury yields and SOFR swap rates are edging a touch lower this morning, as market participants cautiously monitor war developments and progress on diplomatic efforts to end the war. Last night President Trump extended the ceasefire indefinitely to allow Iran time to prepare a “unified proposal” to end hostilities. The news was generally expected, and it was received favorably by the market. However, the open-ended and unclear timetable for negotiations and the continued closure of the Strait of Hormuz are making traders edgy and uncertain. Overall, traders are being careful not to overreact to headlines and rumors – they have learned to ignore the ever-changing rhetoric from both sides and wait for the actual results. I think that is the primary reason we are seeing rates basically bounce around in a narrow range this week – from my perspective, traders await concrete developments. Rates are likely to continue to bounce around in a tight range today.

Make no mistake, there is still a high level of uncertainty surrounding the ultimate outcome, and impact, of this conflict. In short, rate markets participants and investors are remaining patient (and ignoring the rhetoric) under the assumption that negotiations to end the conflict are in fact ongoing. I think that is what is holding rates relatively steady this week. War developments and the associated “headlines” will continue to be the primary market catalysts for the near term.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 rise.

I advise staying nimble if you have upcoming caps or swaps to execute – market dynamics can and will change quickly as war “developments” unfold.

In other news, traders will be keeping one eye on the large slate of corporate earnings reports set for release today. Tesla and Boeing highlight the list of corporates reporting today. The corporate earnings season is off to a strong start – 82% of the 71 companies in the S&P 500 that have reported have outpaced estimates. Investors continue to pay close attention to the AI and tech sectors.

Yesterday, Kevin Warsh, the nominee for next Fed Chairman, testified to the Senate Banking Committee. Surprisingly, Warsh’s testimony yesterday, by most accounts, leaned hawkish! Rate markets, which are squarely focused on the war, largely ignored Warsh’s Senate testimony, but equity markets dropped during his testimony. Bottom line: based on his comments yesterday, Warsh’s confirmation as new Fed Chairman will usher in a period of higher monetary-policy uncertainty. The reforms he advocates could include a different mix of monetary-policy tools, less emphasis on forward guidance, and a sharper focus on inflation.

That said, Warsh’s path to the Chairmanship is by no means without challenges and obstacles. Currently, Senator Thom Tillis, who Chairs the Senate Banking Committee, has vowed to block Warsh’s confirmation until the DOJ case against the Fed is withdrawn or resolved. That is going to leave things uncertain for the near term and could lead to a nasty and protracted showdown between President Trump and Senator Tillis. Right now, nothing is certain. Stay tuned!

“Key News” the market is tracking includes:

• The hearings to confirm the next FOMC Chairman, Kevin Warsh, are underway. His testimony will come against the most politically charged backdrop for the central bank in decades.

• 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. President Trump has stepped-up his anti-Powell rhetoric and threats recently, leading to speculation Chairman Powell may not go quietly into the night when his term as Chairman ends in May. Expect the Fed “drama” to intensify in the coming weeks. The impact on markets is currently uncertain.

• 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 increasingly concerned with the record-setting “partial” government shutdown currently underway. Traders are still hoping the situation is resolved quickly.

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 trading down ~1 bp on the day. The very back-end of the swap curve is currently trading down ~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: 9:00 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 | 9:00 AM NY Rates Snapshot

CHART 2, 2A, 2B & 2C: SOFR SWAP RATES EDGE LOWER AS TRADERS ASSESS WAR OUTLOOK

SOFR swap rates are drifting a touch lower this morning, as traders pause to digest the ceasefire extension and assess the outlook for the war. In the coming days I expect the primary market theme we have witnessed recently to continue: “confirmed” news that a long-term “peace plan” is progressing will lead to a bias toward lower swap rates; conversely, factual news that diplomatic efforts are stalled, failing, or may drag on indefinitely, will likely shift the bias toward higher swap rates. The market is definitely waiting for clarification and direction!

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.

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 ~3.60%(+39 bps). The 5-year SOFR swap rate closed at 3.22% on Friday 2/27 – it is currently trading at ~3.60%(+38 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 ~3.845%(+32.5 bps).

CHART 2:Short-End SOFR Swap Rates – Since 2/27/2026

Source: Bloomberg, LLP | 1Y (white), 2Y (blue) & 3Y (orange) SOFR SWAP RATES, SINCE FEBRUARY 27, 2026

CHART 2A:Long-End SOFR Swap Rates – Since 2/27/2026

Source: Bloomberg, LLP | 5Y (green), 7Y (purple) & 10Y (light blue) SOFR SWAP RATES, SINCE FEBRUARY 27, 2026

CHART 2B:US Treasuries: Yield Overview Since October 2025

Source: StreetStats | US Treasury Bill, Note & Bond Yields; Prior 6-Months

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 4/22/2026

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

• Cap premiums have moved lower recently given the decline in rate volatility and a drop in SOFR swap rates from “war highs”

• Current 1-Month Term SOFR = 3.65234% (Prior day: 3.65250%)

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.

HedgeWithAnEdge-TheRCAEdge!

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.