Central Banks

Wednesday, April 10, 2019 - 11:50

MNI POLICY: Fed's Quarles: To Speed Up SOFR Market Development

By Jean Yung

WASHINGTON (MNI) - Federal Reserve Governor Randy Quarles on Wednesday urged financial institutes to accelerate their transition toward alternative risk-free rates including the Secured Overnight Funding Rate and away from LIBOR, warning LIBOR use could end in two and a half years.

Speaking on the one-year anniversary of the New York Fed's publication of SOFR and other new risk-free rates, Quarles noted substantial progress in the adaptation of the new rates.

SOFR futures saw more than $7 trillion in cumulative notional volumes since they were created, a crucial development for market liquidity that's spurring the growth of SOFR swaps and other derivative markets, he said. Over the past year, $81 billion in SOFR-linked debt were also issued.

These alternative rates, structured to accurately represent well-defined underlying market transactions, were created to shore up stability in the financial system and replace LIBOR by 2021. The Fed has also raised the possibility, though far in the future, that rates like SOFR could replace the fed funds rate as its benchmark rate.

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com


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