Ming Zhu (Bank of America Merrill Lynch)

From LIBOR to SOFR

London Interbank Offered Rate (LIBOR) is the most commonly used reference rate in the global financial market. However, concerns about the sustainability of LIBOR have led to an effort to identify alternative reference rates in major currency jurisdictions. In the United States, Secured Overnight Financing Rate (SOFR) has been selected by Alternative Reference Rates Committee (ARRC) as its recommended alternative to USD LIBOR. In this talk, we give a quick overview of LIBOR market, and illustrate several issues (LIBOR-OIS spread spike, LIBOR submission scandal etc.) observed during recent financial crisis. We then outline the process of searching alternative USD reference rates, provide a brief description of US Treasury repo market, followed by an introduction of SOFR rate. Finally, we summarize the ARRC's paced transition plan and current market development.

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