WSJ: New Benchmark Rate, Gunning to Replace Libor, Gains Traction

Trading in forward contracts using the benchmark rate expected to replace Libor surged to a record this month.

Interest-rate swaps are contracts that allow users to hedge or bet on the cost of future interest payments. The secured overnight financing rate, or SOFR, is now the leading alternative used by the contracts, as opposed to the discredited London interbank offered rate, known as Libor. SOFR was introduced by the Federal Reserve of New York in April 2018.

About $13.6 billion in SOFR-linked swaps changed hands this month, data through Friday shows. That is almost twice the previous high in January and more than 40% of the SOFR swap trades that have taken place since July.

The full article is available at https://www.wsj.com/articles/hedging-rises-on-new-benchmark-rate-amid-concerns-of-quarter-end-swings-11553857201

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