Rising cost of capital points to higher TC rates
The 3M secured overnight finance rate (SOFR) futures implied forward curve shifted higher between 8 September and 7 October, reflecting the recent 25-basis point hike by the Fed and indicating that markets are pricing in a higher path for US interest rates over the coming years. The closely watched US personal consumption expenditures price index rose 3.4% YoY in August 2026, above the Fed’s 2% target. According to the CME FedWatch Tool, there is an 83% probability of at least one Fed rate increase by end-2026. Time charter rates tend to be correlated with interest rates, with both generally moving in a pro-cyclical manner. As interest rates rise during periods of cargo market recovery and capital becomes more expensive, higher financing costs can support stronger TC rates.