N.Y. Fed: SOFR Averages, Index to Be Published Starting in March

The Federal Reserve Bank of New York today published its final calculation methodology for determining the daily compounded averages of the Secured Overnight Financing Rate, as well as the daily SOFR index that will allow users to calculate average rates over customer time periods. Beginning on March 2, the New York Fed will publish daily three compounded average of SOFR, with tenors of 30, 90 and 120 days, as well as the daily index.

The publication of SOFR averages is a key development in the transition away from the London Interbank Offered Rate as a benchmark by making it easier for financial instruments to reference SOFR in contracts while avoiding the volatility of SOFR’s daily movements. SOFR is based on repo transactions secured by Treasurys.

The New York Fed’s Alternative Reference Rates Committee—of which ABA is a member—has identified SOFR as its preferred alternative for U.S. dollar Libor, which is not guaranteed to be available after the end of 2021. The ARRC is releasing resources to support the financial sector’s transition away from Libor.