Rates Tick a Touch Lower on News Reports Second Round of Us/iran Negotiations Expected

Flash Update: US RATE MARKETS – FRIDAY APRIL 24, 2026

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

• Breaking news this morning reports that Iran’s Foreign Minister may arrive in Pakistan tonight, signaling a second round of talks is expected

• Overall, market participants remain 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

• 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 flat to down ~1 bp this morning, depending on tenor

Good morning – US Treasury yields and SOFR swap rates are edging a touch lower this morning on optimism that America and Iran are moving toward talks after days of deadlock. News outlets are reporting that an official familiar with the matter said Iran’s Foreign Minister was expected in Islamabad on Friday, with a second round of talks between Tehran and Washington anticipated. Overall, it is a positive headline and should boost market sentiment that a diplomatic solution may be reached in the near term. However, we have seen many head fakes, and the Iranian regime is clearly in disarray currently, so market participants appear, at best, cautiously optimistic. The somewhat muted reaction to the news headlines this morning is more evidence of a cautious, anxious market.

From my perspective, the market has already priced in much of what a deal would bring. Rates are down a decent amount since March 26, the peak of hostilities. The 2-year SOFR swap rate was trading at ~3.80% on 3/26 – it has declined to the current 3.64% level since. That is a decent move and underscores that the rate markets are expecting this conflict to come to an end soon. Volatility has also declined significantly since the mid-March “highs”, further evidence markets are pricing in an end to the conflict and a return to stability. That said, even with the slow decline in rates recently, they are still well above pre-war levels – rates have plenty of room to move lower should a resolution to the war come quickly.

Overall, traders are still being very 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 have seen rates bouncing around in a narrow range this week – from my perspective, traders await concrete developments.

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. 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.

“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 flat to 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: 9:15 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)

UST YIELDS | SWAP SPREADS | SOFR SWAP RATES

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

CHART 2, 2A, 2B & 2C: SOFR SWAP RATES TICK LOWER ON NEWS SECOND ROUND OF US/IRAN TALKS EXPECTED; OIL PRICES DIP BUT REMAIN ELEVATED

SOFR swap rates are drifting a touch lower this morning, on optimism that a second-round of US/Iran talks will lead to a resolution of the conflict, or at the very least, a clear path forward for an end to the conflict. 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 waiting for concrete clarification and direction!

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.

This morning, Brent crude-oil futures slipped as much as 2% (to ~$103 a barrel), paring the biggest weekly gain since an initial price surge triggered by the Middle East conflict in early March. Oil prices were still up 16% this week as a standoff between the US and Iran over the crucial Strait of Hormuz intensified. The slight drop in oil prices this morning is good news, but we need to see oil prices drop significantly before I expect rates to move materially lower.

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 ~3.650%(+44.0 bps).

• The 5-year SOFR swap rate closed at 3.22% on Friday 2/27 – it is currently trading at ~3.648(+42.8 bps).

• The 10-year SOFR swap rate closed at 3.52% on Friday 2/27 – it is currently trading at ~3.876%(+35.6 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

CHART 2C:Oil Prices Dip On US/Iran Diplomatic News But Remain Elevated

Source: Bloomberg, LLP | WEEKLY PERCENTAGE CHANGE IN PRICE OF BRENT CRUDE OIL SINCE APRIL 2025

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 4/24/2026

• 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 significant decline in rate volatility and a drop in SOFR swap rates from “war highs”

• Current 1-Month Term SOFR = 3.65431% (Prior day: 3.65173%)

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.