LIBOR Transition and Replacement Rate solutions
Overnight (RFR) and Daily Compounded Rates
LIBOR, which currently underpins hundreds of trillions of dollars of financial instruments and contracts, now has a cessation date for all its currencies. Market participants need to find alternative rates now.
Critical financial benchmarks, such as the London Interbank Offered Rate (LIBOR), Euro Interbank Offered Rate (EURIBOR) and Interbank Offered Rates (IBORs) in general, are either set to be discontinued or reformed. In light of this, market participants must seek alternative rates. Within the UK, the Financial Conduct Authority (FCA), has stated that GBP, EUR, JPY & CHF LIBOR will be discontinued post December 2021. From 30 June 2023, USD LIBOR will also cease and so the transition away from these rates is well underway.
New LIBOR alternatives such as; Overnight Risk Free Rates, backwards looking Compound Averages and daily Compound Indices based on the RFRs, are offered through our platforms to help aid our clients through this transition.
What are overnight and daily compounded rates?
At the moment only the near-term rates are being widely distributed and are commonly referred to as the overnight risk free rate (RFR). The overnight rate refers to the interest rate that depository institutions (e.g., banks or credit unions) charge each other for overnight lending.
It is important to note that RFRs are not free of risk, hence they are considered “near risk-free”. RFRs can rise or fall as a result of changing economic conditions and central bank policy decisions
Join Keesa Schreane speaking to Vincenzo Dimase and Jacob Rank-Broadley about the LIBOR transition, IBOR reformation and the introduction of Risk-Free Term rates. We'll also be touching upon and giving more information on the Refinitiv Term SONIA rate.
Discover our solutions for overnight rates and daily compound rates
- At Refinitiv we offer average overnight risk-free rates from central banks across the regions currently available:
UK - GBP (Sterling) SONIA – Transition to SONIA.
- LIBOR is expected to cease after end-2021
Europe - (EUR) = €STR – Transition to €STR.
- EONIA continues to exist under a new methodology since 2 October 2019 to allow a smooth transition to €STR. EUR LIBOR is expected to cease end 2021. EONIA is expected to be discontinued on 3 January 2022.
US - USD(Dollar) -SOFR – Transition to SOFR
- Published since April 2018. 1-week & 2-month tenors will cease end 2021. All other USD Libor tenors will cease after 23rd June 2023.
Japan - Yen(YEN)-TONAR
- Japan is implementing a multi-rate approach with TONAR being promoted. - JPY LIBOR is expected to cease end 2021.
Switzerland - (CHF Swiss Franc Swiss) - SARON
- Transition to SARON, which is a pre-existing rate that was recommended as the alternative to CHF LIBOR in October 2017. LIBOR is expected to cease after end-2021.
Why choose Overnight and daily compound rates?
A wide range of financial products use benchmark rates to determine interest rates and payment obligations.
Refinitiv has access to global exchanges in addition to being regarded around the world as a leading provider of financial benchmarks.
Combine with our benchmark transition services means you can remain assured your move to the new risk-free and term rates are made as seamless as possible.
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