To Swap or Not to Swap
Rising Interest Rates Place Spotlight on Interest Rate Swaps and Caps;
Catapulting Forward Curves Complicate Process
The Federal Reserve’s commitment to increasing interest rates highlights the potential for borrowers to hedge against such climbs with an interest rate swap or cap. The steep rise in the benchmark SOFR forward curve however accentuates the risk in utilizing both instruments. Understanding the possible benefits and costs is critical as borrowers contend with higher lending rates.