It's The End Of LIBOR As We Know It

Across the global markets, the countdown to midnight on New Year's Eve started long before revelers gathered in Times Square. Regulators had announced that the end of 2021 would also be the end of nearly all tenors of LIBOR in the $400 trillion global market. This presented multiple challenges on two fronts: new transactions needed to find a replacement benchmark(s) as a reference for their borrowing costs and outstanding "legacy" transactions needed to function without disruption following the discontinuance of their embedded benchmark.

For several years, committees organized by central banks, such as the Alternative Reference Rates Committee (or "ARRC"), had worked on identifying robust alternative reference rates for their respective currencies. In the U.S., the ARRC settled on the Secured Overnight Financing Rate ("SOFR"), a "risk-free" rate that is derived from $800+ billion of daily trading activity in the U.S. Treasury repo market. While considered to be