Rates Holding Mostly Steady as Traders Regroup After a Volatile Week

Flash Update: US RATE MARKETS – FRIDAY AUGUST 21, 2026

• UST yields and SOFR swap rates are holding mostly steady this morning, as traders regroup after a volatile week

• The conflict in the Middle East and the US Treasury Department’s bond market intervention were the big market stories this week

• Despite the uptick in rate volatility this week, rates are ending the week little changed from Monday’s open

• Elevated oil prices have put inflation risks back on market participants’ radar and increased market uncertainty

• Traders continue to anxiously monitor the conflict in the Middle East and remain in a “wait-and-see” mode

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

• The next FOMC rate decision is due on Wednesday, September 16th at 2:00 PM

• As of this morning, odds for a September Fed rate hike are sitting at ~34.6%

• Next up for key economic data: 2Q GDP, Aug. PCE, Aug. Personal Income and Aug. Personal Spending are all due for release on Wednesday 8/26 at 8:30 AM

• Short-term SOFR swap rates are trading flat to down ~1 bp this morning, depending on tenor

• Medium-term SOFR swap rates are down ~5-6 bps currently, depending on tenor

• Long-end SOFR swap rates are trading down ~4-5 bps this morning, depending on tenor

Good morning – US Treasury yields and SOFR swap rates are drifting a touch lower this morning, as traders regroup after a volatile week. Mounting concern about the outcome in the Middle East, rising oil prices and US Treasury Department intervention were the big stories this week. Despite pockets of elevated rate volatility this week, rates are ending the week little changed from Monday’s opening levels. The 2-year SOFR swap rate opened the week at 4.028% and is currently trading at ~4.036%. The 10-year SOFR swap rate opened the week at 4.282% and is currently trading at ~4.296%.

Rates are likely to continue to generally track the direction of oil prices for the near term, but many uncertainties remain:

• There is still a high level of uncertainty surrounding the outcome of the conflict in the Middle East and oil prices remain elevated. The longer the conflict lingers, the greater the inflation threat and the possibility for sustained higher rates.

• The US Treasury Department is now clearly in “intervention mode”. We can expect more announcements and policy tweaks in the coming weeks.

• We will see the next series of key economic and inflation data starting next week. Given the tight-lipped Fed, I expect economic data to be even more important for traders going forward.

It was quiet on the economic data front, but the conflict in the Middle East and the US Treasury Department buyback announcement gave the market plenty to grapple with this week. The next “big” economic data event is on 8/26, when we will see PCE, 2Q GDP, Personal Income and Personal Spending all released at 8:30 AM.

I expect the market’s focus to remain squarely on the conflict in the Middle East. Overall, I do not expect a material dip in rates until the conflict in the Middle East is resolved. Further Treasury Department intervention and policy adjustments may help some, but for now that remains a huge wildcard. I do not think this week’s intervention met the objective – the market quickly shook it off. Bottom line, market uncertainty regarding the path forward for interest rates remains at elevated levels – I anticipate market “uncertainty” to remain elevated for the foreseeable future.

CHART OF THE DAY: Despite Elevated Volatility This Week, Rates End the Week Little Changed

Source: Bloomberg, LLP | 30Y UST BOND YIELD – PIROR 5 TRADING SESSIONS

“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.

• Lack of forward guidance from the Fed is forcing traders to pay more attention to economic data – this may fundamentally change the way markets position for and react to Fed rate announcements. Stay tuned!

• 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, may be impacted by tech-sector results for the foreseeable future.

• Tariffs remain in focus, although the crisis in the Middle East is still garnering most of the market’s attention. On some level, more tariffs are last thing global markets need right now – they are already grappling with massive inflation uncertainty due to the conflict in the Gulf. This is a developing story - the market impact is undetermined currently.

• The US Treasury Department’s bond market intervention this week sets the stage for more to come. Stay tuned!

SOFR Swap Rate Quick Summary:

The 1Y SOFR swap rate is trading down ~1 bp this morning. 2Y and 3Y SOFR swap rates are currently trading down ~1-1.5 bps. 5Y and 10Y SOFR swap rates are trading down ~1-1.5 bps this morning. The very back-end of the swap curve (20Y and 30Y) is currently down ~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: 9:00 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 MOSTLY STEADY AS TRADERS REGROUP AFTER A VOLATILE WEEK

SOFR swap rates are holding mostly steady this morning, maybe a bp or so lower depending on tenor. Despite some “whipsaw” rate volatility this week, SOFR swap rates end the week little changed. Overall, we are still seeing the “narrow range” summer markets we have been experiencing the past two weeks. Lack of key economic data and tremendous uncertainty surrounding the Middle East are keeping swap rates range bound. The Treasury Department intervention was an unexpected, but welcome wildcard for the Treasury and swap markets. I expect to hear a lot more from Mr. Bessent in the coming weeks. He will likely try to use all the tools at his disposal to keep rates from running away to the upside. As we saw this week, that objective may be tougher to achieve than he thinks. We will also see some key economic data next week, which may help to shape the market’s view on rates.

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 2/27/2026 – it is currently trading at ~4.036%(+82.6 bps)

• The 5-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.102%(+88.2 bps)

• The 10-year SOFR swap rate closed at 3.52% on Friday 2/27/2026 – it is currently trading at ~4.296%(+77.6 bps)

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 8/21/2026

• Current 1-Month SOFR = 3.65872%(Prior Day’s Reset: 3.65191%)

• Despite pockets of elevated volatility this week, rate volatility remains relatively subdued overall

• Cap premiums are holding relatively steady as SOFR swap rates are currently trading in a narrow range

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.

CHART 3:Historical Volatility: MOVE Composite US Treasury Yield Volatility Index - Year-To-Date 2026

Source: Bloomberg, LLP | HISTORICAL US TREASURY YIELD VOLATILITY, “MOVE” INDEX – YTD 2026

^NOTE:RATE MARKETS CAN BE VOLATILE - 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.