Rates Edge Lower as Traders Monitor US-Iran Peace Progress

Flash Update: US RATE MARKETS – TUESDAY JUNE 2, 2026

• UST yields and SOFR swap rates are edging lower as traders monitor US-Iran peace progress…or lack thereof

• Oil markets are still optimistic a peace deal can be reached between the two sides

• Brent crude oil eased after its biggest gain in about a month, falling ~1.2% to below$94 a barrel; The dip in oil prices is helping to nudge rates lower this morning

• President Donald Trump said he is still optimistic the US can reach an interim peace agreement with Iran “over the next week,” despite Iran’s threats to suspend talks because of escalating attacks in Lebanon

• The US/Iran war remains the primary driver for the rate markets

• Next up for key data: The May Employment Report is due Friday 6/5 at 8:30 AM

• The April JOLTS jobs report prints this morning at 10:00 AM

• The next FOMC rate decision is due on Wednesday, June 17th at 2:00 PM

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

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

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

Good morning – US Treasury yields and SOFR swap rates are ticking a touch lower this morning as market participants monitor progress toward an interim peace plan in the Middle East. Traders are waiting for signs that a deal that would end the conflict and reopen the Strait of Hormuz remains on track.

Crude oil prices drifted lower on continuing optimism that a peace plan between the US and Iran is in the works. The price of Brent crude oil eased after its biggest gain in about a month, falling 1.2% this morning to below $94 a barrel. In the latest “war” update, President Donald Trump said he is still optimistic that the US can reach an interim peace agreement with Iran “over the next week,” despite Iran’s threats to suspend talks because of Israel’s escalating attacks in Lebanon. Traders will continue to anxiously monitor war developments as news and developments unfold.

The market faces a difficult crossroads. Traders are torn between unprecedented euphoria around the economic potential of AI and a war that has brought about a historic disruption in energy markets. The current uncertainty about how close a deal may be means market participants must consider that crude prices could retreat dramatically or surge to the highest levels in years. Right now, the market’s focus remains squarely on higher inflation. For the moment, the economic growth potential of AI is tempering fears of slower economic growth.

Overall, rates have been holding mostly steady the past week or so as market participants hold out hope that a peace plan between the US and Iran will be reached soon. Rates are likely to remain in somewhat of a holding pattern until we get the next substantive update on progress towards a peace plan between the US and Iran. Traders are also likely to continue to “take their cue” from the direction of oil prices.In short, as go oil prices, so go rates.

Bottom line: The overall “rate markets theme” we have been tracking recently continues – tangible progress towards a US/Iran peace deal and/or lower oil prices will likely lead to lower rates and more stable markets. Conversely, if we see indications that the peace deal will not happen, is significantly delayed or worse, hostilities resume, we are likely to get higher oil prices and higher rates. From my perspective, the only way we will see materially lower rates is a peaceful resolution to the US-Iran conflict, and soon. Make no mistake, rates can easily move higher from here if peace talks collapse or hostilities resume.

We will see the April JOLTS jobs report released this morning at 10:00 AM. Expectations are as follows: Job Openings, 6866k; Quits Levels, 3138k; Layoffs, 1842k. I do not expect the JOLTS data to materially move rates; most economists expect a solid April result. However, it may snap a portion of the market’s attention toward the US jobs market, especially considering that we will see the May Employment Report on Friday.

“Key News” the market is tracking includes:

• Geopolitical developments continue to weigh on markets.The US/Iran “war” will continue to dominate market sentiment this week.

• Kevin Warsh begins his term as Fed Chairman. He will oversee his first meeting as FOMC Chairman in June. From the market’s perspective, there are still many questions surrounding both Mr. Warsh’s monetary policy views and his plans for the central bank, and what is next for Mr. Powell.

• Market participants continue to track developments in the US equities markets. There is still a sharp focus on the performance of the growing AI sector. Overall market sentiment, and perhaps even economic performance, could be impacted by “tech” earnings for the foreseeable future.

• SCOTUS is 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.

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 ~1-2 bps. 5Y and 10Y SOFR swap rates are trading down ~1-2 bps on the day. The very back-end of the swap curve is currently trading down ~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: 9:00 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 | 9:00 AM NY Rates Snapshot

CHART 2, 2A & 2B: SOFR SWAP RATES DRIFT LOWER AS A JITTERY MARKET HOPES FOR PEACE

SOFR swap rates are drifting a touch lower this morning, as market participants hope an interim peace plan between the US and Iran is close. Oil prices dipped a touch overnight on optimism a peace plan is coming soon, leading to slightly lower swap rates this morning.

That said, market participants are growing increasingly frustrated by the lack of tangible progress on a US-Iran peace plan. Traders have become increasingly skilled at cutting through the rhetoric and focusing on the facts, but they are clearly losing patience.

Key SOFR 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 ~3.889%(+67.9 bps).

• The 5-year SOFR swap rate closed at 3.22% on Friday 2/27 – it is currently trading at ~3.878%(+65.8 bps).

• The 10-year SOFR swap rate closed at 3.52% on Friday 2/27 – it is currently trading at ~4.041%(+52.1 bps).

CHART 2:Short-End SOFR Swap Rates – Since 2/27/2026 (Start of War)

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

CHART 2A:Long-End SOFR Swap Rates – Since 2/27/2026 (Start of War)

Source: Bloomberg, LLP | 5Y (green), 7Y (purple) & 10Y (light blue) SOFR SWAP RATES; SINCE 2/27/2026

CHART 2B:US Treasuries: Yield Overview Since November 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 once 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 high-level of uncertainty surrounding 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 6/2/2026

• Current 1-Month Term SOFR = 3.62123% (Prior day: 3.61988%)

• Cap premiums have held mostly steady this week as swap rates remain largely range bound

• Traders are waiting for a substantive update on a Middle East peace plan

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.