Rates Tick Higher on Fresh US-Iran Hostilities

Flash Update: US RATE MARKETS – MONDAY JULY 13, 2026

• UST yields and SOFR swap rates are ticking higher this morning after fresh military clashes between the US and Iran

• Renewed hostilities between the US and Iran have cast doubt on the ceasefire agreement and rekindled fear of a return to all-out war

• Traders remain extraordinarily patient; Oil prices are relatively steady (up ~4% this morning) and rates remain largely range bound, albeit biased to the upside

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

• Next up for data: June CPI data will be released tomorrow, 7/14 at 8:30 AM; June PPI will be released on Wednesday, 7/15 at 8:30 AM; June Retail Sales will be released on Thursday 7/16 at 8:30 AM

• The next FOMC rate decision is due on Wednesday, July 29th at 2:00 PM

• Short-term SOFR swap rates are trading up ~1-3 bps this morning, depending on tenor

• Medium-term SOFR swap rates are up ~1-3 bps currently, depending on tenor

• Long-end SOFR swap rates are trading up ~1-3 bps this morning, depending on tenor

Good morning – US Treasury yields and SOFR swap rates are ticking higher this morning on the back of fresh military clashes between the US and Iran. Given the renewed uncertainty surrounding peace in the Middle East, the fragile truce between the US and Iran is keeping geopolitical risk front of mind for market participants. Bottom line, by all measurements it appears this conflict is far from over. The ongoing, unresolved conflict will continue to fan inflation fears and keep the bias towards higher rates. Currently, SOFR swap rates are up ~1-2 bps across the curve. Nothing dramatic, but it underscores the market is still firmly biased toward higher rates currently.

Markets will see June CPI data released tomorrow at 8:30 AM. I think the market’s focus will remain squarely on the Middle East, but given the focus on inflation, traders will be keen to see how the war is impacting consumer prices. A weaker-than-expected number would likely help to soothe fears of a spike in inflation, and we may see rates drop slightly. In my view, inflations fears will not diminish until we get an end to the conflict in the Middle East. A stronger-than-expected CPI print would likely exacerbate inflation jitters and lead to slightly higher rates. A strong CPI report could also increase the odds for a Fed rate hike. Expectations for June CPI are as follows: Headline MoM, -0.1% (vs. 0.5% the prior month); Headline YoY, 3.8% (vs. 4.2% prior); Core MoM; 0.2% (vs. 0.2% prior); Core YoY, 2.9% (vs. 2.9% prior). The drop in MoM headline CPI is expected due to slightly lower gasoline prices.

“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.

SOFR Swap Rate Summary: The 1Y SOFR swap rate is trading up ~1-3 bps this morning. 2Y and 3Y SOFR swap rates are currently trading up ~1-3 bps. 5Y and 10Y SOFR swap rates are trading up ~1-3 bps this morning. The very back-end of the swap curve is currently up ~1-3 bps from Friday’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: 10:00 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 | 10:00 AM NY Rates Snapshot

CHART 2, 2A & 2B: SOFR SWAP RATES TICK HIGHER AS US-IRAN HOSTILITIES RAMP UP

SOFR swap rates are ticking a touch higher this morning as US-Iran hostilities ramp-up. The market is also looking ahead to key economic data set for release this week (CPI, PPI, Retail Sales) and to a slew of tech and corporate earnings reports due this week. The continuing uncertainty regarding the US-Iran war will continue to weigh heavily on markets for the near term. Potential changes within the FOMC are also captivating markets and adding to forward rate uncertainty, particularly on the Fed-sensitive short end of the yield curve.

As I have been highlighting, market participants are getting more practiced about reacting to Middle East related rumors and headlines – that is a positive on some levels, but it also underscores that the market simply does not know what to believe! The ever-shifting rhetoric, “crying wolf” and unmet deadlines are creating a new level of market uncertainty regarding the outlook for the conflict in the Middle East. There does not seem to be a quick, or easy way out of the conflict for the US.

I said it last week and feel it even more strongly about it today: Should tension in the Middle East ramp back up, rates are likely to continue to creep higher. If the ceasefire collapses and/or oil prices march higher, SOFR swap rates are likely to follow close behind. I think both sides would be well served to turn down the rhetoric and get back to the negotiating table.

US-IRAN WAR IMPACT: 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 ~4.085%(+87.5 bps).

• The 5-year SOFR swap rate closed at 3.22% on Friday 2/27 – it is currently trading at ~4.038%(+81.8 bps).

• The 10-year SOFR swap rate closed at 3.52% on Friday 2/27 – it is currently trading at ~4.159%(+63.9 bps).

• Note: 2-year, 3-year, 5-year SOFR swap rates are currently trading at 12-month highs. 10-year SOFR swap rates are ~8 bps off the 12-month highs.

CHART 2:Short-End SOFR Swap Rates – Year-To-Date 2026

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

CHART 2A:Long-End SOFR Swap Rates – Year-To-Date 2026

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

CHART 2B:US Treasuries: Yield Overview – Year-To-Date 2026

Source: StreetStats | US Treasury Yields; YTD 2026 (30Y UST yield – top line; 10Y UST yield – middle line; 2Y UST yield – bottom line)

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 7/13/2026

• Current 1-Month SOFR = 3.65942%(Prior Day’s Reset: 3.67529%)

• Fresh hostilities between the US and Iran are increasing market uncertainty and fear of higher inflation, leading to higher rates and higher cap premiums

• Rate volatility remains relatively subdued as markets weigh a host of market variables – however, the subdued rate volatility may not last if conditions in the Middle East worsen

Cap Pricing Matrix:1-Month Term SOFR Cap Premiums: Week-On-Week

*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.

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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.