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The ICEman Goeth! NY Fed Releases 1st Secured Overnight Financing Rate (SOFR)

(Bloomberg) — In an effort to offer a more transparent alternative to U.S. dollar Libor, the New York Federal Reserve released its first Secured Overnight Financing Rate (SOFR) Tuesday.

SOFR opened at 1.80. Considerably lower than either the ICE Libor 1 month or 3 month rates.

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The Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities. The SOFR  includes all trades in the Broad General Collateral Rate plus bilateral Treasury repurchase agreement  (repo) transactions cleared through the Delivery-versus-Payment (DVP) service offered by the Fixed Income Clearing Corporation (FICC), which is filtered to remove a portion of transactions considered “specials”.

The SOFR is calculated as a volume-weighted median of transaction-level tri-party repo data collected from  the Bank of New York Mellon (BNYM) as well as GCF Repo transaction data and data on bilateral Treasury repo transactions cleared through FICC’s DVP service, which are obtained from DTCC Solutions LLC, an affiliate of the Depository Trust & Clearing Corporation. Each business day, the New York Fed publishes the SOFR on the New York Fed website at approximately 8:00 a.m.

Here is NY Fed President Dudley (aka. Mr Freeze) introducing the Libor replacement, SOFR.

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