Rates Ease on Iran Deal Hopes

DAILY BRIEF: US RATE MARKETS – TUESDAY, AUGUST 11, 2026

• Rate Movements:

  • UST yields and SOFR swap rates are lower this morning as a Pakistan-mediated report, suggesting the US and Iran are close to finalizing a deal, sends oil lower and eases the inflation concerns that had been building into tomorrow's CPI report

  • Short-term SOFR swap rates are down ~1-2 bps

  • Medium-term SOFR swap rates are down ~1-2 bps

  • Long-end SOFR swap rates are down ~0.5-1 bps

• Today's Catalysts:

  • Oil is retreating this morning after Pakistani PM Shehbaz Sharif, a key mediator throughout the conflict, indicated the US and Iran are close to a deal, reversing Monday's rally that had been driven by Trump's compensation demands

  • Markets are bracing for tomorrow's July CPI report (Wed, 8/12), seen as a key input for the September FOMC meeting

  • Last Friday's July jobs report showed payrolls fell 23K (vs. ~80K expected), with 103K in downward revisions to May/June — A dovish counterweight pulling against this week's inflation focus

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

  • Equity markets remain in focus as pressure on the tech sector continues — Chipmakers and AI names remain most vulnerable

• Fed Watch + Upcoming Data:

  • Next FOMC meeting: Wednesday, September 16th at 2:00 PM with odds for a 25 bp rate hike currently at ~51.2%

  • Next up: July CPI is due for release on Wednesday, 8/12 at 8:30 AM

  • For a full economic calendar: Please visit astdefeasance.com

Good Morning — US Treasury yields and SOFR swap rates are lower this morning after Pakistani Prime Minister Shehbaz Sharif indicated the US and Iran are close to finalizing a deal to reopen the Strait of Hormuz, reversing much of Monday's oil-driven rate rise. The report caught markets somewhat off guard given Trump's hardened stance over the weekend, underscoring how quickly sentiment has swung between optimism and setback throughout this conflict. However, with CPI due tomorrow morning, that report will set the tone for the rest of the week. For the week, short-end SOFR swap rates are up ~2.5 bps overall, nudging 1Y/2Y cap premiums higher.

Please note: Market uncertainty regarding the path forward for interest rates remains elevated and likely to persist for the foreseeable future.

MARKET MOVERS:

Oil Retreats as Pakistan Signals US-Iran Deal Is Close
Oil reversed course this morning after Pakistani Prime Minister Shehbaz Sharif indicated the US and Iran have moved close to finalizing a deal to reopen the Strait of Hormuz, despite President Trump's weekend demand that Iran pay compensation for conflict deaths, which had appeared to set talks back. Pakistan has served as a key mediator throughout the negotiations, and this is not the first time reports of an imminent breakthrough have moved markets sharply, only for the deal to stall before signing.

Given that pattern, today's rate relief should be treated cautiously. An actual signed agreement would be a materially different catalyst than another round of "close to a deal" headlines. With CPI due tomorrow, that data is likely to matter more for the ​mid-term path of rates than today's geopolitical headline either way.

Source: Bloomberg, LLP | BRENT CRUDE OIL PRICES — Last 5D

IN OTHER NEWS:

• Tariffs remain a live theme: a 15% Section 232 tariff on polysilicon (used in semiconductors and solar panels) took effect August 6, and a 50% tariff on a range of Canadian goods (agriculture, dairy, furniture, alcohol) is set to take effect August 19

• Treasury supply is in focus this week: the quarterly refunding brings a 3-Year Note auction today (Tue, 8/11), a 10-Year Note auction tomorrow (Wed, 8/12), and a 30-Year Bond auction Thursday (8/13), totaling $125B in new issuance

• AI-concentration risk in equities is drawing renewed scrutiny after a prominent AI-focused hedge fund VARA dropped 44% in July

SOFR SWAP RATE SUMMARY:
SOFR swap rates are trading down across the curve this morning: 1Y ~1-2 bps, 2Y/3Y ~1-2 bps, 5Y/10Y ~1-2 bps, and 20Y/30Y ~0.5-1 bps at the back end.

US Rates Snapshot: 8:30 AM ET

Source: Bloomberg, LLP | 8:30 AM NY Rates Snapshot | Columns: UST Yields & Chg (bps) — SOFR OIS Swap Spreads & Chg (bps) — SOFR OIS Swap Rates & Chg (bps)

US-Iran War Impact: Key SOFR Swap Rate Movements Since The Conflict Began

• 2Y SOFR swap rate: 3.21% on Fri 2/27 → ~4.0845% currently (+87.5 bps)

• 5Y SOFR swap rate: 3.22% on Fri 2/27 → ~4.1184% currently (+89.8 bps)

• 10Y SOFR swap rate: 3.52% on Fri 2/27 → ~4.2847% currently (+76.5 bps)

Short-End SOFR Swap Rates: Year-To-Date 2026

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

Long-End SOFR Swap Rates: Year-To-Date 2026

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

US Treasuries: Yield Overview: Year-To-Date 2026

Source: StreetStats | US Treasury Yields; YTD 2026 (30Y — top, 10Y — middle, 2Y — bottom)

RCA PRODUCT & PRICING UPDATE:

Product Spotlight: What We Are Seeing In The Rates & Derivatives Markets

• Big Picture: Interest rate uncertainty remains elevated across the market. Consequently, borrowers should stay nimble in this market environment.

• Caps: Cap purchasers can onboard at no cost and should be positioned to act quickly when the market moves in their favor. Clients weighing extensions should monitor pricing closely and check current levels before committing, the same way they purchased an original cap.

• Swaps: Growing interest in interest rate swaps as a hedge alternative — No upfront premium, but counterparty selection is more involved than with a cap. We're also seeing rising swap termination requests as refinancing activity picks up.

• Floors: Residual demand persists — Borrowers with embedded loan floors are considering stand-alone floors to offset them.

Cap Pricing & Volatility Update: 8/11/2026

• Current 1-Month Term SOFR = 3.64039% (-0.42 bps)

• Volatility and cap premiums are modestly lower this morning as oil retreats on reports of a possible US-Iran deal, though the move is likely to be tested by tomorrow's CPI print

Cap Premiums: Trailing 2-Weeks

Source: AST Defeasance | Rate Cap — $25MM, 3.50%, 3Y

Cap Volatility: Trailing 2 Weeks

Source: AST Defeasance | Implied Volatility — 3.50%, 3Y

Reminder: Rate markets can be volatile — Market dynamics and pricing can change quickly in this market environment. We recommend you call us for accurate, up-to-the-minute cap indications. Reach out to discuss an upcoming rate cap or extension, 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.

Hedge With An Edge - The RCA Edge!

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.