Bloomberg Law
April 21, 2023, 5:47 PM

Fed-Backed ARRC Expands Use of Forward-Looking SOFR Rates (1)

Alexandra Harris
Alexandra Harris
Bloomberg News

A Federal Reserve-backed body said it will allow more market participants to use longer-dated benchmarks tied to the Secured Overnight Financing Rate, paving the way for broader use of forward-looking rates.

The Alternative Reference Rates Committee’s new guidance recognizes the ability of any users to enter into term-overnight SOFR basis swaps even when those traders aren’t holding cash assets they’re looking to hedge. The additional entrants could include firms such as hedge funds, asset managers or bank treasurers.

This step will let dealers unload some term SOFR risk to other market participants, “but is expected to continue to ...

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