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ARTICLE · 22 OCTOBER 2019

SOFR: LIBOR: P/TOMO And No QE

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Federal Reserve Chairman Jerome Powell gave a speech on Tuesday, October 8, that touched upon recent events in the repo market. We discuss below certain aspects of this speech in the context

United StatesFinance and Banking
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 “In no sense, is this QE…”

Federal Reserve Chairman Jerome Powell

Federal Reserve Chairman Jerome Powell gave a speech on Tuesday, October 8, that touched upon recent events in the repo market. We discuss below certain aspects of this speech in the context of the market discussion regarding the replacement of U.S. dollar LIBOR with SOFR – the Secured Overnight Financing Rate in USD. USD LIBOR is at the heart of the interest rate world and its replacement is a once in a generation challenge.

SOFR is a rate published by the Federal Reserve Bank of New York (the “New York Fed”) based upon secured overnight transactions in the repo market. It is of increasing importance, since it has been regarded by many market participants as the basis for the likely successor to U.S. dollar LIBOR, a long-standing benchmark which is being phased out at the behest of the U.K.’s Financial Conduct Authority.

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