FHLBs Issue $4B in Debt Tied to Alternative Reference Rate

As part of the ongoing effort to replace Libor with an alternative rate, the Federal Home Loan Banks today issued $4 billion in debt tied to the Federal Reserve’s Secured Overnight Financing Rate, or SOFR, according to reports today. With the future of Libor — which currently underpins many derivatives contracts and loans — uncertain after 2021, this move by the FHLBs is intended to help build momentum for transitioning to the alternative rate.

Federal Reserve Vice Chairman for Supervision Randal Quarles expressed his support for the FHLBs’ action, noting that “regular issuance programs of this kind will support further liquidity in and demonstrate the level of demand for SOFR products.”