Brian Chappatta, Columnist

New U.S. Overnight Rate Moves Out of Libor’s Shadow

The World Bank joins Fannie Mae in issuing debt tied to the Secured Overnight Financing Rate.

August 15, 2018 at 5:01 PM UTC

Brian Chappatta is managing editor of Bloomberg News' leveraged finance and distressed debt teams. He was previously managing editor and team leader of its wealth group. Before that he was a Bloomberg Opinion markets and finance columnist and a bonds reporter for Bloomberg News.

Move over, Libor.
Photographer: Stan Honda/AFP/Getty Images

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Jefferies LLC economists have called the transition away from the scandal-plagued London Interbank Offered Rate “the most important development in the financial markets in the years immediately ahead.” And there are developments aplenty.

Without much fanfare, the World Bank this week issued $1 billion of two-year floating-rate notes tied to the U.S. Secured Overnight Financing Rate, or SOFR. It’s the second sale of such debt after a $6 billion offering from Fannie Mae on July 26 with tenors of six months, 12 months and 18 months. Suddenly, the Libor alternative is picking up some momentum, with Bloomberg News’s Maciej Onoszko reporting that Toronto-Dominion Bank now expects a company or financial institution to tap the market in a matter of months.