The Federal Reserve Bank of New York has announced the publication of the indicative term rates for the Secured Overnight Financing Rate (SOFR). The announcement marks a significant development in the transition from LIBOR, which is set to be phased out by mid-2023. According to the release, these indicative term rates are based on a methodology that uses SOFR futures data.
In a statement, John C. Williams, President and CEO of the Federal Reserve Bank of New York, emphasized the importance of this step: "This publication is an important milestone in our work to support a smooth transition away from LIBOR." He added that it provides market participants with an additional tool to help them manage their risks and prepare for the cessation of LIBOR.
The indicative term rates are available for one-month, three-month, six-month, and twelve-month tenors. These new rates are expected to aid financial institutions in adjusting contracts currently tied to LIBOR.
David Bowman, Senior Associate Director at the Board of Governors of the Federal Reserve System, commented on the development: "The publication of these indicative term rates should further facilitate market participants' planning as they transition away from using LIBOR."
Market participants are encouraged to consider these new rates as they plan their transition strategies. The Federal Reserve continues to work closely with other regulators and industry groups to ensure a smooth shift from LIBOR.