Rates Tick Higher as Market Awaits Warsh Comments

Flash Update: US RATE MARKETS – WEDNESDAY JULY 1, 2026

• UST yields and SOFR swap rates are ticking a touch higher this morning as markets await comments from Fed Chairman Warsh at ~9:00 AM

• Markets are also bracing for a slew of economic data set to be released today and tomorrow

• Chair Warsh will deliver comments from the annual ECB conference in Sintra, Portugal this morning at ~9:00 AM

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

• Next up for data: The June Employment Report will be released tomorrow, July 2 at 8:30 AM

• Short-term SOFR swap rates are trading up ~1 bp 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 ~2-3 bps this morning, depending on tenor

• Please note: Rate markets close early tomorrow 7/2 and are closed on Friday 7/3

Good morning – US Treasury yields and SOFR swap rates are ticking higher as the market awaits comments from Fed Chairman Warsh. Markets are also bracing for tomorrow’s release of the June Employment report and continuing to closely monitor developments in the Middle East. Currently, rates are up ~1-3 bps across the curve. Warsh will be speaking on a panel alongside the governors of the BOE, ECB and Bank of Canada. In addition to Warsh’s comments at ~9:00 AM, traders will also see June ISM Manufacturing and Prices Paid data released this morning at 10:00 AM. We could see increased volatility today and tomorrow given Chair Warsh’s speech and the data on tap for release.

The prominent data event this week will be the release of the June Employment Report tomorrow, 7/2 at 8:30 AM. The jobs data is being released a day early due to the market closure on Friday. A strong employment report would likely give the Fed confidence they can hike 25 basis points without damaging the labor market. A solid jobs market allows the FOMC to concentrate on inflation, which based on the prior Fed meeting, is their primary concern now. Fed-speak has gotten more Hawkish over the past two months, so it feels like the Fed is primed and ready to raise the benchmark rate. How soon is the prevailing question. Expectations for tomorrow Employment Report are as follows: Change in Non-Farm Payrolls, 115k (vs. 174k the prior month); Change in Private Payrolls, 115k (vs. 120k prior); Unemployment Rate, 4.3% (unchanged from prior).

If I was forced to make a call, I would say that the risk for rates is to the upside today. A hawkish Warsh could push rates higher as the market prepares for a rate hike.

Bloomberg Fed-Speak Index

Source: Bloomberg, LLP | FED-SPEAK INDEX

“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.

• 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, could be impacted by “tech” earnings for the foreseeable future.

SOFR Swap Rate Summary: The 1Y SOFR swap rate is trading up ~1 bp 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 bps this morning. The very back-end of the swap curve is currently trading up ~2-3 bps 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: 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)

UST YIELDS | SWAP SPREADS | SOFR SWAP RATES

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

CHART 2, 2A & 2B: SOFR SWAP RATES TICK HIGHER AS MARKET WAITS FOR WARSH, BRACES FOR RELEASE OF JUNE JOBS DATA

SOFR swap rates are ticking higher this morning, as the market waits for comments from Fed Chair Warsh and braces for key labor market data. Chair Warsh is speaking this morning at a gathering of global central bankers in Sintra, Portugal. With the FOMC basically split down the middle as to whether the next move should be to hike or hold rates, Warsh’s stance is particularly important. In addition, given the absence of forward guidance from the Fed now, there is going to be a laser focus on any comments from Warsh. The ECB’s annual Sintra conference will offer a fresh opportunity to assess where he stands. We could see swap rates bounce around today and tomorrow, given the Warsh speech and data the market will see. Reminder: Rate markets close at 2:00 PM on Thursday 7/2 and are closed on Friday 7/3.

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 – it is currently trading at ~4.036%(+82.6 bps).

• The 5-year SOFR swap rate closed at 3.22% on Friday 2/27 – it is currently trading at ~3.956%(+73.6 bps).

• The 10-year SOFR swap rate closed at 3.52% on Friday 2/27 – it is currently trading at ~4.073%(+55.3 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.

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 7/1/2026

• Current 1-Month SOFR = 3.65197% (Prior Day’s Reset: 3.64670%)

• Cap premiums have tickedhigher over the past few trading sessions due to an uptick in SOFR swap rates

• The 2-Year SOFR swap rate began the week at 3.947% and is currently trading at ~4.036% (~+8.9 bps)

• Rate volatility remains relatively subdued as the market weighs a host of market variables

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.

^NOTE: 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.