Definition
A benchmark interest rate based on overnight loans backed by Treasuries, published every business day by the New York Fed.
The story
Many floating-rate loans and derivatives reset based on SOFR. It replaced LIBOR (the London Interbank Offered Rate) as the main US dollar benchmark after LIBOR's US dollar panel ended in June 2023. It's based on actual transactions rather than banks' estimates, as LIBOR was, and LIBOR was hit by a rigging scandal.
Why markets watch it
SOFR is where the Fed's rate decisions first show up in the market for borrowing against Treasuries.
Connects to
We explain why it moves markets. What you do with it is your call. Commentary and education only. Not financial advice. All terms