Jumbo SOFR swaps herald new world of repo betting
A $6 billion interest rate swap that hit the market this week – and was quickly followed by a $3 billion trade – suggests traders are starting to explore opportunities created by the rates world’s newest benchmark, the US secured overnight financing rate, or SOFR.
Because the benchmark is a blend of three different repo rates, SOFR swaps could now be used to hedge or exploit repo market moves – and swaps traders will need to be more aware of potential feedback between the markets.
The full article is available at https://www.risk.net/derivatives/6498171/jumbo-sofr-swaps-herald-new-world-of-repo-betting