Rates Tick Higher

RATE MARKETS UPDATE: THURSDAY AUGUST 6, 2026

It is a quiet, but nervous market currently. Rates are creeping higher as apprehension grows about tomorrow’s jobs data. A cautious uncertainty is also gripping the market with respect to the crisis in the Middle East. Barring any unexpected news out of the Middle East, I see rates biased higher today.

US Treasuries sold off this morning, leading to slightly higher swap rates, and cap premiums. The uptick in rates was driven by two primary catalysts: Alphabet’s massive 10-tranche bond deal, which is weighing on the long-end of the curve, and a Financial Times report that Fed Chair Warsh would be prepared to raise rates at September's FOMC meeting if upcoming inflation readings are “hot”.

Currently, the news out of the Middle East has been stable, if not positive. However, without any substantive results, markets have adopted a “wait-and-see” approach. Rates have drifted higher the past two days due to the stronger-than-expected economic data we have seen this week, including this morning’s weekly jobless claims data. That said, the market is being very careful not to get too carried away on any major directional move, given the massive uncertainty that is still permeating the rate markets. The fact that rates are drifting higher this morning tells me the fear of rising inflation and subsequent Fed rate hikes is very real.

However, I do see rates moving lower, perhaps materially, if Friday's jobs report is weak and/or a longer-term US-Iran peace agreement materializes. That said, a strong jobs report would likely give the Fed comfort that they could raise rates without damaging economic growth or the jobs market – in that case we likely see higher rates. A resumption of Middle East hostilities or a collapse in negotiations would likely lead to higher crude oil prices, and higher rates.

CHART 1: US RATES SNAPSHOT: 9:15 AM Eastern

• US Treasury yields and SOFR swap rates are currently up ~2-3 basis points across the curve

Chart 1 Key:

o Far Left Columns: US Treasury Yields & Change on Day (bps)

o Center Columns: SOFR OIS Swap Spreads (bps) & Change on Day (bps)

o Far Right Columns: SOFR OIS Swap Rates & Change on Day (bps)

Source: Bloomberg, LLP | 9:15 AM NY Rates Snapshot

CHART 2: JULY EMPLOYMENT REPORT EXPECTATIONS: FRIDAY 8/7 AT 8:30 AM

Source: Bloomberg, LLP | July Employment Report Expectations

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