Rates Tick Higher as US Rejects Latest Iranian Proposal

MARKET UPDATE: MONDAY SEPTEMBER 28, 2026 – 9:15 AM EASTERN

Good morning – US Treasury yields and SOFR swap rates are moving higher this morning on the back of higher oil prices. The US has rejected the latest proposal from Tehran to fully reopen the Strait of Hormuz, which is pushing oil prices and rates higher. The direction of rates continues to be closely correlated to the direction of oil prices. Brent crude oil is currently sitting near ~$107 per barrel. Odds for a 25 bp Fed rate hike at the October meeting open the week at ~64.2%.

Currently, SOFR swap rates are up 4-6 basis points across the curve, putting further upward pressure on cap premiums. Economic data is light today, so I expect traders to continue to track developments in the Middle East until we start to see the data released later this week.

The “rate” theme continues: The conflict in the Middle East and the price of crude oil continue to be the primary rate markets drivers. However, traders will see some key economic data released later this week – data that is likely to grab the market’s focus. The data deluge starts tomorrow with the JOLTS jobs and Consumer Confidence reports due at 10:00 AM. On Wednesday, 9/30 we will see revised 2Q GDP, PCE, ADP employment, Personal Income and Personal Spending data all released at 8:30 AM. On Thursday, 10/1 ISM Manufacturing and Prices Paid data and the S&P Global US Manufacturing PMI results are due at 10:00 AM. Last, but certainly not least, we will see the September Employment Report released Friday, 10/2 at 8:30 AM. This batch of key data could set the tone for monetary policy for the remainder of the year. This is a tightly bunched timeline for data releases – traders will be paying close attention to the results.

Given the myriad market forces at work currently and the deluge of key economic data on tap, we may be in for a volatile week for rates. Market uncertainty remains extremely elevated, as does the path forward for interest rates.

CHARTS OF THE DAY:

Yields on US Treasuries surged in September, with nearly all US benchmark yields now hovering around or above 5%. This is due to various factors including high energy prices, large US budget deficits and rising FOMC rate hike expectations.

A: High Oil Prices Continue to Put Upward Pressure on Term Rates

Source: Bloomberg, LLP | US 10-YEAR NOTE YIELD SINCE 2007

B: SOFR Swap Rates Surge During September

Source: Bloomberg, LLP | 1Y, 2Y, 3Y, 5Y & 10Y SOFR SWAP RATES – SEPTEMBER 2026

C: Traders Brace for a Deluge of Key Economic Data This Week

Source: Bloomberg, LLP | HISTORICAL PCE, REAL SPENDING, UNEMPLOYMENT RATE AND CHANGE IN NONFARM PAYROLLS SINCE 2024

D: Oil Prices Rise as US Rejects Latest Iranian Proposal to Fully Reopen the Strait of Hormuz

Source: Bloomberg, LLP | BRENT CRUDE OIL PRICES – PRIOR 12-MONTHS

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