US Rates Strategy: Stop out of 3Yx4Y swaps as oil prices surge

Research evidence excerpt

US Rates Strategy: Stop out of 3Yx4Y swaps as oil prices surge

Global Research

22 July 2026ab

US Rates Strategy Interest Rates

AmericasStop out of 3Yx4Y swaps as oil prices surge

Phoebe White

Strategist

Despite the flattening in the curve over the past week, the climb in yields at the phoebe.white@ubs.com

+1-212-713 2130

front end through the belly to new highs alongside the rise in oil prices has

driven us to stop out of our long position in 3Yx4Y swaps (initiated 7/10/26 here; Reinout De Bock

Figure 13Yx4Yswapyieldshaverisensharplyinrecentsesionsandwestopoutofthistrade). The US-Iran conflict is now in its second week of renewed fighting, with no Strategist

near-term off-ramp in sight and both sides signaling that peace talks are not imminent. reinout.de-bock@ubs.com

+44-20-7567 0152

Thus, even following a much softer-than-expected June CPI report last week, concerns

are rising that the reversal higher in energy prices will stall progress toward the Fed’s 2% Mustafa Oguz Caylan

inflation target. Additionally, the move higher in yields has been global in nature, with Strategist

2Y German Schatz and UK gilt yields rising 19-21bp since July 10th (Figure 2Themovehasbenglobalinnature,withEuropeanandUKyieldsunderperforming.), as TTF mustafa.caylan@ubs.com

+44-20-7901 5203

natural gas prices have risen above their local March peak (Figure 3.asTFnaturalgaspriceshaverisenabovetheirlocalMarchpeak). With these moves,

markets are once again pricing a 1-in-3 chance the Fed hikes at its meeting next week,

while a full 25bp hike is priced by September.

Figure 1: 3Yx4Y swap yields have risen sharply in recent Figure 2: The move has been global in nature, with

sessions and we stop out of this trade European and UK yields underperforming...

eld nderperforming...

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