Markets Brace for FOMC Chairman Warsh's Speech This Morning at 10:00 Am, "The" Market Event This Week

Flash Update: US RATE MARKETS – FRIDAY AUGUST 28, 2026

• US Treasury yields and SOFR swap rates are drifting a touch higher this morning ahead of Fed Chair Warsh’s crucial Jackson Hole speech

• FOMC Chairman Warsh is set to speak this morning 10:00 AM at the Fed’s annual symposium in Jackson Hole, Wyoming

• Given the recent tight-lipped Fed, traders will be paying very close attention to what Chair Warsh has to say about the economy and inflation

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

• Odds for a 25 bp September Fed rate hike have dipped slightly this week to ~35.9%

• The US-Iran conflict, and the price of crude oil, remain the primary drivers for the rate markets

• Next up for key economic data: The August Employment Reports prints on Friday, 9/4 at 8:30 AM

• Short-term SOFR swap rates are trading up ~1-2 bps this morning, depending on tenor

• Medium-term SOFR swap rates are up ~1-2 bps currently, depending on tenor

• Long-end SOFR swap rates are trading up ~1-2 bps this morning, depending on tenor

Good morning – US Treasuryyields and SOFR swap rates are drifting a touch higher ahead of Federal Reserve Chair Kevin Warsh’s address at Jackson Hole. Market participants will be looking for clarity on Warsh’s economic outlook and strategy for bringing inflation back to target. Chair Warsh’s speech, scheduled for 10:00 AM Eastern, is shaping up as a crucial moment for rate markets, as doubts about his commitment to taming inflation have helped push up long-term yields. A divided FOMC and the Treasury Department’s bond market intervention further complicate the backdrop. Warsh’s speech at 10:00 AM is the story for markets today, and probably, for this week.

At Jackson Hole, Warsh will likely again make the case for reduced forward guidance and reiterate his firm commitment to the Fed’s inflation target. However, if he does not adequately explain how the FOMC will get there, it likely won’t assuage markets. “Big talk” means nothing to bond traders! I also believe that Warsh needs to provide more color on how policymakers would react to different economic scenarios – it will take markets time to adjust to less Fed forward guidance. We want orderly and efficient markets, not chaos and uncertainty.

Bottom line for me: A strong showing by Warsh today could stabilize the long end of the Treasury curve, and push short term yields up as markets increase the odds for a Fed rate hike this year. A poor speech by Warsh, on the other hand, would likely deepen the Treasury selloff on the long-end (higher rates) and the yield curve will steepen. In that case, short-end rates could stay anchored due to Fed uncertainty or even decrease slightly as traders and investors reallocate positions to shorter Treasury maturities.

CHARTS OF THE DAY: IS CHAIR WARSH SERIOUS ABOUT TAMING INFLATION? MARKETS ARE FAR FROM CONVINCED…

Source: Bloomberg, LLP | 30Y UST YIELD SINCE SEP. 2025

Source: Bloomberg, LLP | 30Y UST YIELD SINCE JANUARY 2026; (NOTE WARSH’S FIRST AND SECOND PRESS CONFERENCES)

“Key News” the market is tracking includes:

• Geopolitical developments continue to weigh on markets.Developments in the US/Iran “war” will continue to captivate the market’s attention.

• 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, particularly the developing situation between the US and Canada. On many levels, 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!

• Fed Chair Warsh speaks this morning at 10:00 AM at the Fed’s annual Jackson Hole symposium. I expect Chair Warsh to attempt to rebuild his credibility and discuss how the Fed plans to tackle rising inflation. Markets are looking for a “clear message” on inflation from the Fed.

SOFR Swap Market - Quick Summary:

The 1Y SOFR swap rate is trading up ~1-2 bps this morning. 2Y and 3Y SOFR swap rates are currently trading up ~1-2 bps. 5Y and 10Y SOFR swap rates are trading up ~1-2 bp this morning. The very back-end of the swap curve (20Y and 30Y) is currently up ~1-2 bps from yesterday’s closing levels.

CHART 1:US RATES SNAPSHOT: 8:45 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)

Please note: Market levels can change rapidly – rate cap premiums are subject to a dynamic market that can change frequently.

UST YIELDS | SWAP SPREADS | SOFR SWAP RATES

Source: Bloomberg, LLP | 8:45 AM NY Rates Snapshot

CHART 2, 2A & 2B: SOFR SWAP RATES STEADY AHEAD OF KEY WARSH TESTIMONY

SOFR swap rates are holding mostly steady this morning as markets prepare for Fed Chair Warsh’s speech this morning at 10:00 AM. Inflation sensitive long-term rates are up a tick or two ahead of the Jackson Hole event. Short-end rates ticked higher on fears that rate hikes are coming.

Chair Warsh’s performance at his last press conference was widely criticized. I anticipate that Warsh will attempt to re-establish Fed credibility and to elaborate in slightly greater detail about his plans to tame inflation. That said, there is an equal (greater?) chance that Warsh digs in and perhaps even doubles-down on the tight lipped, ambiguous, no guidance approach he seems to prefer. All ears will be on Chair Warsh this morning – not only in the US, but globally.

Despite sporadic pockets of “whipsaw” rate volatility last week, vol is holding mostly steady this week. Markets continue to swirl around in a “wait-and-see” mode on several potential market catalysts. Perhaps Chair Warsh will be able to shake-up the market today when he speaks in Jackson Hole.

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 ~4.106%(+89.6 bps)

• The 5-year SOFR swap rate closed at 3.22% on Friday 2/27/2026 – it is currently trading at ~4.144%(+92.4 bps)

• The 10-year SOFR swap rate closed at 3.52% on Friday 2/27/2026 – it is currently trading at ~4.313%(+79.3 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.

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, however, swaps are secured derivatives, so the counterparty selection process is more challenging with a swap. It is often challenging to place a swap away from the lender or incumbent relationship bank. There are also additional variables that factor into the decision to pursue an interest rate swap, or to unwind an existing swap. With the uptick in swap rates recently, we are also seeing an increase in swap termination requests. Please let us know if you would like to learn more about interest rate swaps, or swap terminations. RCA offers a full range of Derivative Advisory services.

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. Market price discovery is a key component to any cap transaction – new caps, extensions, or 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 8/28/2026

• Current 1-Month SOFR = 3.68640%(Prior Day’s Reset: 3.68525%)

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

• Given Fed Chair Warsh’s Jackson Hole speech on Friday, the possibility of additional Treasury Department intervention and the full plate of key economic data on tap, we may see an uptick in volatility

• 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.

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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.