Definitions #
A benchmark interest rate that reflects the cost of borrowing cash overnight using U.S. Treasury securities as collateral.
Technical The Secured Overnight Financing Rate, a volume-weighted median of transaction-level repo data, published by the Federal Reserve Bank of New York since April 2018 as a replacement for LIBOR.
Example The swap contract was repriced based on SOFR, which replaced LIBOR as the fallback benchmark.
Etymology #
Acronym for Secured Overnight Financing Rate; coined by the U.S. Federal Reserve to denote a secured (collateralized) overnight funding benchmark.
Collocations #
- SOFR-based loan 贷款按SOFR计息
- term SOFR 期限SOFR（如1个月、3个月）
- SOFR spread adjustment SOFR利差调整（用于从LIBOR过渡）
- SOFR futures SOFR期货（芝加哥商业交易所产品）
Real Business Examples #
- The syndicated credit facility was amended to reference SOFR plus a credit adjustment spread.
- Hedge documentation now specifies SOFR as the fallback rate for derivative transactions.
Register & Variants #
- Register: formal
- BrE/AmE: Global, used in U.S. dollar markets worldwide
Synonyms & Antonyms #
- Synonyms: Secured Overnight Financing Rate
Common Errors #
- Treating SOFR as a term rate like 3-month LIBOR before term SOFR was published SOFR is an overnight rate; use term SOFR or compounding for longer tenors.
- Assuming SOFR includes bank credit risk SOFR is secured by Treasuries; it does not include bank credit risk, unlike LIBOR.
Confusable Terms #
- EFFR vs SOFR
- EFFR is the unsecured federal funds rate; SOFR is secured and based on repo transactions.
Frequently Asked Questions
Why did SOFR replace LIBOR??
LIBOR was unreliable after the 2008 scandal; SOFR is based on real transactions and is more robust.
Is SOFR always higher than LIBOR??
No, SOFR can be lower or higher; the spread adjustment is applied to compensate for the difference.