The Federal Reserve today announced plans to publish three new reference rates for use in U.S. dollar derivatives and financial contracts starting in the second quarter of 2018. The rates will be published no later than 8 a.m. ET each day. The London Interbank Offer Rate — the standard reference rate in use today, with more than $160 trillion in outstanding loans, derivatives and financial products pegged to it — will be sustained only through the end of 2021.
The Fed will publish a Secured Overnight Financing Rate, or SOFR, a broad measure of overnight Treasury financing transactions recommended by the Alternative Reference Rate Committee earlier this year as a replacement for U.S. dollar Libor. It would be calculated based on triparty repo data from the Bank of New York Mellon and General Collateral Finance Repo from DTCC Solutions, plus a filtered set of bilateral Treasury repo transactions cleared through a Fixed Income Clearing Corporation service.
The Fed will also publish a Tri-Party General Collateral Rate, or TGCR, based on triparty repo data from BNY Mellon and a Broad General Collateral Rate, or BGCR, based on both the TGCR and cleared triparty repo data from DTCC. ABA continues to engage members on reference rate transition issues with respect to commercial lending obligations. Read the proposal. For more information, contact ABA’s Barry Mills.