This Libor Successor Is Growing Up, But Still Hasn't Come of Age
- Secured Overnight Financing Rate has made headway with GSEs
- But wider adoption elusive as market awaits term structure
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Happy birthday, SOFR. It was one year ago that the Federal Reserve Bank of New York debuted the Secured Overnight Financing Rate, seeking to create a new global benchmark for dollar-based funding and ultimately put the much maligned London interbank offered rate out of its misery.
No one ever said it was going to be easy. Yet few predicted the reference rate’s growing pains would be quite so, well, painful. Two weeks after its introduction, the New York Fed disclosed it made errors calculating the rate. More recently, it’s faced renewed scrutiny amid greater-than-expected volatility, especially around month-end.