Rate Markets Update · Friday, June 26, 2026
Rates Drift Lower as Crude Oil Prices Retreat
- Outlook for Middle East Improves
Flash Update: US RATE MARKETS – FRIDAY JUNE 26, 2026
UST yields and SOFR swap rates are drifting lower this morning as crude oil prices continue to retreat, and commercial traffic flows through the Strait of Hormuz
The US/Iran conflict remains a primary driver for the rate markets; Traders continue to monitor regional developments
Next up for data: The June Employment Report will be released on Thursday, July 2 at 8:30 AM
Short-term SOFR swap rates are trading down ~1-3 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 trading flat to up ~1 bp this morning, depending on tenor
Good morning – US Treasury yields and SOFR swap rates are ticking lower this morning – lower crude oil prices and an improved outlook in the Middle East are the primary catalysts for lower rates this morning. Rates are only down a basis point or two, but the gradual decline in rates we have witnessed this week provides evidence that the market outlook in the Middle East continues to improve. Lower oil prices and an increase in commercial traffic through the Strait of Hormuz are tangible positives for the market. Those positives have translated to lower rates. The 2-Year SOFR swap rate closed on Monday, 6/22 at 4.09% - it is currently trading at ~3.949%. The drop in SOFR swap rates, coupled with relatively subdued rate volatility has provided some relief on cap premiums that spiked dramatically during the peak of the US-Iran conflict.
One thing to keep in mind: There was an attack by Iran last night on a container vessel – markets have largely looked through that event and remain cautiously optimistic on peace negotiations and regional stability in the short-term. That said, keep an eye on the Gulf news today – the “improved” outlook I mention may quickly reverse if there are further attacks by Iran or if traffic through the Strait of Hormuz is once again halted. Markets want to be optimistic on the prospects for peace and lower oil prices – let’s hope that actual developments continue to back-up that optimism! As I type this update, we are already bouncing off the lows of the day.
We may also see a dip in rates after the equity markets open – traders appear to be lightening up in the tech sector and reallocating assets to safe-haven Treasuries. If that happens, it could help ease rates down as the day progresses.
“Key News” the market is tracking includes:
Geopolitical developments continue to weigh on markets.Developments in the US/Iran “war” will continue to dominate market sentiment.
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.
SOFR Swap Rate Summary: The 1Y SOFR swap rate is trading down ~1-2 bps this morning. 2Y and 3Y SOFR swap rates are currently trading down ~2-3 bps. 5Y and 10Y SOFR swap rates are trading down ~1-2 bps this morning. 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
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 | 9:30 AM NY Rates Snapshot
CHART 2, 2A & 2B: SOFR SWAP RATES DRIFT LOWER ON IMPROVED MIDDLE EAST OUTLOOK AND LOWER OIL PRICES
SOFR swap rates are drifting lower this morning due to an improved outlook for the Middle East and lower oil prices. After peaking on Monday, SOFR swap rates are down between 10 and 15 basis points across the curve this week. The market’s short-term outlook continues to improve as oil prices retreat and commercial traffic begins to flow through the Strait of Hormuz. Those “positives” have helped to mitigate fear that we might be facing “war-induced” runaway inflation. The recent encouraging developments in the Middle East and an “as expected” May PCE print signaled we may yet avert higher sustained inflation. That is the primary reason we have seen a gradual reduction in SOFR swap rates this week.
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 ~3.949%(+73.9 bps).
The 5-year SOFR swap rate closed at 3.22% on Friday 2/27 – it is currently trading at ~3.861%(+64.1 bps).
The 10-year SOFR swap rate closed at 3.52% on Friday 2/27 – it is currently trading at ~3.984%(+46.4 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, Prior 6-Months
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 6/26/2026
Current 1-Month Term SOFR = 3.65261% (Prior Reset: 3.65178%)
Cap premiums have drifted lower this week due to a slight dip in SOFR swap rates
Rate volatility remains relatively subdued as the market weighs a host of market variables
Crude oil prices continue to decline, providing another catalyst for lower SOFR swap rates
Cap Pricing Matrix:1-Month Term SOFR Cap Premiums: Week-On-Week
Notional Amount | Tenor | Strike Rate | ~Premium 6/19/26 | ~Premium 6/26/26*^ |
$25,000,000 | 1-Year | 3.50% | ~$128k | ~$142k |
$25,000,000 | 1-Year | 4.50% | ~$32k | ~$31k |
$25,000,000 | 2-Year | 3.50% | ~$295k | ~$321k |
$25,000,000 | 2-year | 4.50% | ~$106k | ~$103k |
$25,000,000 | 3-Year | 3.50% | ~$471k | ~$494k |
$25,000,000 | 3-Year | 4.50% | ~$195k | ~$189k |
*Indications as of market open. Premium levels provided are indications only and subject to frequent 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.