SOFR

(Daily Rate)

5.34%

July 18, 2024


 

SOFR Definition

What is SOFR? What is the SOFR Rate?

SOFR (Secured Overnight Financing Rate) is a benchmark interest rate used in financial markets. It is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities. The SOFR rate is published daily by the Federal Reserve Bank of New York, and it is intended to replace the LIBOR (London Interbank Offered Rate) as a benchmark interest rate.

LIBOR was phased out due to concerns about its reliability and accuracy. LIBOR has been subject to manipulation scandals, and the underlying market that LIBOR measures had become less active over time, making it harder to calculate the rate accurately. SOFR, on the other hand, is based on actual transactions in the U.S. Treasury repurchase (repo) market, which is a large and active market. This means that the SOFR rate is considered to be a more reliable and accurate measure of short-term borrowing costs than LIBOR. Additionally, the Federal Reserve has been promoting SOFR as an alternative benchmark rate, and many financial institutions and regulators have endorsed its use as a replacement for LIBOR.

Basically, the Secured Overnight Financing Rate (SOFR) is calculated as a volume-weighted median of transactions in the U.S. Treasury repurchase (repo) market.

The repo market is where financial institutions borrow and lend cash overnight, using U.S. Treasury securities as collateral. The transactions in this market provide a measure of the cost of borrowing cash overnight, which is the basis for the SOFR.

Each day, the Federal Reserve Bank of New York collects transaction data from various sources, including primary dealers and other financial institutions, and calculates the SOFR rate based on the volume-weighted median of these transactions. The volume-weighted median is a statistical measure that gives more weight to larger transactions, and it is designed to provide a representative measure of the overall cost of overnight borrowing in the repo market.

The SOFR is used as a benchmark interest rate for a wide range of financial products, including loans and mortgages.

 

SOFR Recent History

DateValue
July 18, 20245.34
July 17, 20245.35
July 16, 20245.35
July 15, 20245.34
July 12, 20245.34
July 11, 20245.34
July 10, 20245.34
July 9, 20245.34
July 8, 20245.32
July 5, 20245.32
July 3, 20245.33
July 2, 20245.35
July 1, 20245.40
June 28, 20245.33
June 27, 20245.34
June 26, 20245.34
June 25, 20245.33
June 24, 20245.31
June 21, 20245.31
June 20, 20245.32
June 18, 20245.33
June 17, 20245.33
June 14, 20245.31
June 13, 20245.31
June 12, 20245.31
June 11, 20245.32
June 10, 20245.32
June 7, 20245.33
June 6, 20245.33
June 5, 20245.33

https://fred.stlouisfed.org/graph/?id=SOFR


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