Credit-Sensitive Rates Could Allay Libor Transition Hurdles

Law360 (July 16, 2021, 3:14 PM EDT) -- U.S. bank officials have blamed the lack of Libor transition progress in part on the array of new alternative benchmarks, voicing opposition to credit sensitive benchmarks in particular.

Most recently, U.S. Securities and Exchange Commission Chair Gary Gensler criticized the Bloomberg Short-Term Bank Yield index, or BSBY, as inferior to the Secured Overnight Financing Rate, or SOFR, due to its fragile liquidity base and potential for manipulation.

This article evaluates this and other statements by U.S. bank officials favoring SOFR by presenting new analyses of SOFR's performance weaknesses and insights from recently issued debt contracts adopting SOFR as a benchmark rate. ...

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