Rate Markets Update · Thursday, June 4, 2026
Rates Drift Lower as Market Monitors US-Iran Peace Negotiations
- Market Awaits May Employment Data Due Tomorrow
Flash Update: US RATE MARKETS – THURSDAY JUNE 4, 2026
UST yields and SOFR swap rates are ticking lower this morning as traders closely monitor US-Iran “peace plan” progress…or lack thereof
Hope remains that the two sides are moving toward an “interim” agreement
The US/Iran war remains the primary driver for the rate markets this week
Next up for key data: The May Employment Report is due tomorrow, 6/5 at 8:30 AM
The next FOMC rate decision is due on Wednesday, June 17th at 2:00 PM
Short-term SOFR swap rates are trading down ~3-5 bps this morning, depending on tenor
Medium-term SOFR swap rates are down ~4-5 bps currently, depending on tenor
Long-end SOFR swap rates are down ~3-4 bps this morning, depending on tenor
Good morning – US Treasury yields and SOFR swap rates are edging lower this morning after President Trump said negotiations to end the war in Iran were in the “final stages”. (Note: that is the third time he has said that since mid-May). Iran refuted President Trump’s comments, saying there had been no recent progress toward a deal, and fighting persisted overnight in Lebanon. Market participants are holding on to optimism that a peace deal between the two sides is close, despite recent rhetoric which suggests the contrary. Oil prices also dipped on President Trump’s comments.
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.
The May Employment Report will be released tomorrow, 6/5 at 8:30 AM. Markets will be paying close attention to the results but given the backdrop of the US-Iran conflict, the jobs data is likely to have a muted impact on the market, unless it prints wildly above or below expectations. Recent data has evidenced that the US labor market remains solid, and tomorrow’s data is anticipated to validate that view. Expectations for tomorrow’s Employment Report are as follows: Change in Non-Farm Payrolls, 85k (vs. 115k the prior month); Change in Private Payrolls, 86k (vs. 123k prior); Unemployment Rate, 4.3% (vs. 4.3% prior).
“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 ~3-4 bps this morning. 2Y and 3Y SOFR swap rates are currently trading down ~4-5 bps. 5Y and 10Y SOFR swap rates are trading down ~3-4 bps on the day. The very back-end of the swap curve is currently trading down ~2-3 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 DIP AS TRADERS MONITOR NEGOTIATIONS BETWEEN THE US AND IRAN
SOFR swap rates are moving a touch lower this morning, erasing most of yesterday’s gains across the curve. The 2-year SOFR swap rate closed at 3.905% on Tuesday and is currently trading at 3.896%. In short, comments by President Trump that an interim peace plan is close pushed yields slightly lower this morning. Overall, traders remain cautious and await substantive updates on a Middle East peace accord.
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 ~3.896%(+68.6 bps).
The 5-year SOFR swap rate closed at 3.22% on Friday 2/27 – it is currently trading at ~3.893%(+67.3 bps).
The 10-year SOFR swap rate closed at 3.52% on Friday 2/27 – it is currently trading at ~4.051%(+53.1 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 6/4/2026
Current 1-Month Term SOFR = 3.61264% (Prior day: 3.61931%)
Traders are patientlywaiting for a substantive update on a Middle East peace plan
Pricing Matrix:1-Week Movement In 1-Month Term SOFR Cap Premiums
Notional Amount | Tenor | Strike Rate | ~Premium 5/28/26 | ~Premium 6/4/26*^ |
$25,000,000 | 1-Year | 3.50% | ~$114k | ~$116k |
$25,000,000 | 1-Year | 4.50% | ~$29k | ~$31k |
$25,000,000 | 2-Year | 3.50% | ~$278k | ~$290k |
$25,000,000 | 2-year | 4.50% | ~$99k | ~$106k |
$25,000,000 | 3-Year | 3.50% | ~$475k | ~$485k |
$25,000,000 | 3-Year | 4.50% | ~$203k | ~$208k |
*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.