Quick Take: SOFR rose to 3.65%, up from roughly 3.50% to 3.55% in mid-May, moving into the upper half of an unchanged Fed Funds range. The benchmark most floating-rate commercial loans price off climbed while the Fed and Prime stood still.
What Changed This Week
- SOFR: 3.65%, up about 10 to 15 bps from its mid-May low; now above the 3.625% midpoint of the target range.
- The firming held: SOFR stepped up around May 26 to 3.63% and stayed there through month-end, five business days.
- Prime Rate: 6.75%, unchanged on the week and the month.
- Fed Funds target range: 3.50% to 3.75%, unchanged since early May; next FOMC June 16-17.
- BBB corporate spreads: 92 bps, flat. Credit spreads did not widen alongside the SOFR move.
- Prime minus SOFR spread: 310 bps, narrowed about 8 to 10 bps as SOFR rose and Prime held.
No policy action sits behind this week's move. The Fed has not met since early May, Prime is anchored to the unchanged target range, and yet the secured overnight benchmark that prices much of the floating-rate commercial loan market drifted higher and stayed there. For borrowers whose debt references SOFR directly, costs rose modestly with no rate decision to explain it; for borrowers on Prime-based products, nothing changed at all.
Many floating-rate commercial loans reference SOFR directly, while Prime-based products such as many SBA 7(a) loans and business lines of credit were unchanged this week. That distinction explains how a benchmark can firm while Prime stays flat: the two reference different rates, and only one of them moved. Which loans repriced and which did not comes down to that reference, not to any single market event.
Market Signal: SOFR at 3.65% now sits in the upper half of a Fed Funds range the FOMC left alone, so SOFR-linked borrowers pay modestly more, roughly $500 a year per $500,000 of floating-rate balance, with no Fed decision behind it. With BBB corporate spreads flat at 92 bps, this is benchmark drift, not credit stress.
- Prime Rate: 6.75% (unchanged)
- SOFR: 3.65% (up ~10-15 bps from mid-May)
- Fed Funds target: 3.50% to 3.75% (unchanged; midpoint 3.625% )
- Cycle position: On hold; SOFR drifting into the upper half of the range
- Next catalyst: FOMC June 16-17 with updated projections
Key Takeaways
- A floating-rate benchmark can move without the Fed moving; SOFR proved it this week, firming to 3.65% while policy stayed put.
- The move was small but it held, stepping up around May 26 and persisting through month-end rather than reversing, which is what makes it worth noting.
- SOFR-linked borrowers paid more this week; Prime-based borrowers, including many SBA 7(a) and line-of-credit holders, paid exactly what they did before.
- Stable BBB spreads at 92 bps indicate the move was confined to the secured overnight market, not a broad repricing of credit risk.
- The Prime-SOFR gap narrowed to 310 bps because SOFR moved while Prime stayed flat.
- The practical takeaway is a planning one: floating-rate exposure carries benchmark risk independent of Fed decisions, which is worth weighing at the next financing decision rather than urgently.
Current Rates
| Benchmark | Current | Weekly change |
|---|---|---|
| Prime Rate | 6.75% | Unchanged |
| SOFR | 3.65% | Up ~10-15 bps from mid-May low |
| Fed Funds (target range) | 3.50% to 3.75% | Unchanged |
| 2-Year Treasury | 4.05% | Reported |
| 10-Year Treasury | 4.47% | Reported |
| 30-Year Treasury | 4.99% | Reported |
| BBB corporate OAS | 92 bps | Flat (no widening) |
The daily SOFR trail tells the story better than any single reading: the rate stepped up around May 26 and held, rather than spiking and snapping back.
What Moved
SOFR did the moving. After bottoming near 3.50% to 3.51% in the third week of May, the rate firmed to 3.63% around May 26 and edged to 3.65% by June 1, leaving it roughly 10 to 15 bps above its mid-May low and above the 3.625% midpoint of the unchanged target range. Everything anchored to the Fed's policy setting stayed put: Prime at 6.75%, the target range at 3.50% to 3.75%. The narrowing of the Prime-SOFR gap to 310 bps is the arithmetic result of one benchmark rising while the other held. Stable BBB spreads at 92 bps confirm the move did not travel into the broader credit market.
Where We Are in the Cycle
The Fed remains on hold, and the curve is mildly positive, with the 2s10s slope at +42 bps. Within that holding pattern, the secured overnight rate has drifted into the upper portion of the corridor. That positioning is worth tracking but not over-reading: it describes where SOFR sits relative to the range, not a forecast of where policy goes next. The June 16-17 FOMC meeting, which arrives with an updated set of economic projections, is the next point at which the range itself could change. Until then, floating-rate borrowers are exposed to benchmark drift inside a fixed band, while fixed-rate borrowers and Prime-based borrowers are insulated from it.
Borrower Implications
For SOFR-linked floating-rate debt, the cost increase is real but modest. A roughly 10 bps move works out to about $500 per year on every $500,000 of floating-rate balance, and about $1,000 per year on every $1,000,000. That is a plan-able number, not a reason to act urgently. It does, however, make this a sensible moment to revisit the fixed-versus-floating question at the margin, particularly for firms carrying large floating balances that would feel a sustained drift more than a one-week tick. Borrowers can weigh how their own spread sits on top of the benchmark using our explainer on borrower spread versus benchmark rates.
Fixed-rate borrowers are unaffected by this week's move; their cost was locked at origination and does not float with SOFR. The same logic explains why fixed pricing does not automatically fall when the Fed cuts, a dynamic we cover in why fixed loan rates do not fall when the Fed cuts rates. Prime-based borrowers, including many holders of SBA 7(a) loans and business lines of credit, also saw no change this week, since Prime stayed at 6.75%. The practical line to draw is by reference rate: if the loan references SOFR, it repriced; if it references Prime or carries a fixed rate, it did not. For the mechanics of how Prime itself is set, see how the Prime Rate is determined.
What to Watch
The firming has held: SOFR printed 3.63% on June 2, confirming the step-up did not immediately reverse. Whether it stays in the upper half of the range past the next set of catalysts is the open question. On the calendar, the NFIB Small Business Optimism reading lands June 9, May CPI is expected June 10 to 12, and the FOMC meets June 16-17 with a fresh dot plot. The FOMC is the only one of these that could move the target range itself; the rest shape the backdrop. For the most recent prior reading in this series, see the May 4 borrowing cost snapshot.