Trading

Replacement for Libor benchmark suffers volatility spike

If SOFR proves unusually hard to predict, it would diminish the rate’s appeal to companies considering tying borrowing costs to it

Tuesday 12 February 2019 at 07:15

Recent volatility in the market for overnight cash loans is raising concerns about a new benchmark that could set interest rates for trillions of dollars in mortgages and corporate debt.

The cost to borrow cash overnight spiked late last year in part of the market for repurchase agreements, where lenders such as money market funds make short-term loans to bond brokers, often using government debt as collateral.