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LIBOR Transition: Do record high SOFR trade counts tell the whole story?

Andrew Hollins
Andrew Hollins
Director of Corporate Treasury Proposition, Refinitiv

Andrew Hollins, Director of Corporate Treasury Proposition at Refinitiv, brings you the August 2021 round-up of the latest Corporate Treasury Data Insights.

  1. Release of “SOFR First” initiative sees record high trade counts and volumes across SOFR, but LIBOR continues to dominate markets.
  2. In consultation with the FX industry, Global Foreign Exchange Committee recently completed its three-year review of the 55 principles of the FX Global Code (FXGC).
  3. IMF research raises concerns about how the impact of central banks’ monetary policy is being blunted by powerful mega firms.

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Corporate Treasury Charts of the Month

Over the past few weeks we have seen record high trade counts and volumes across SOFR with the release of the “SOFR First” initiative. However, when you look at the total notional USD LIBOR continues to dominate markets and the SONIA derivative markets are the most mature of the bunch for treasurers today.

Refinitiv launches USD IBOR cash fallbacks prototype

The new prototype supports treasurers with their migration away from USD LIBOR and follows the Alternative Reference Rates Committee’s (ARRC) announcement that it selected Refinitiv to publish its recommended spread adjustments and spread adjusted rates.

There are two versions of the cash fallbacks and both will be published to 5 decimal places:

  • Refinitiv USD IBOR Consumer Cash Fallbacks
  • Refinitiv USD IBOR Institutional Cash Fallbacks

Find out more about Refinitiv’s LIBOR Transition and Replacement Rate solutions here ­­->

Can probability of default predict the direction of the credit default swap rate?

A CDS is a contract that provides insurance against a credit event of a company, such as default, bankruptcy, or debt restructuring. The buyer of protection agrees to pay periodic insurance premiums to the protection seller, until the expiration of the contract or a contractually defined credit event time, whichever occurs earlier.

The annualised payment rate is called the CDS rate and it varies over time, depending particularly on the company probability of default. Refinitiv has published new research on how CDS rates react to changes in probability of default and assess whether the StarMine models have predictive power on future CDS rates. Find out how the highly responsive StarMine Structural Credit Risk model can add value over traditional credit rating agencies >

Three-year review of the FX Global Code completed

The Global Foreign Exchange Committee recently completed its three-year review of the FX Global Code (FXGC). Comprised of central banks and private sector employees, the Global Foreign Exchange Committee was established in 2017 and aims to promote a global FX market which is robust, fair, liquid, and transparent.

In consultation with the FX industry, the Committee has now completed a three-year review of the 55 principles of the FXGC. As the FX market continues to evolve, it’s important that the FXGC keeps pace with new processes and technologies while remaining practical and directly relevant to the day-to-day practices of the FX market. How can Refinitiv support buy- and sell-side firms as they adhere to the updated code? >

Dominance of mega firms may undermine monetary policy

If central banks’ policies of zero interest rates and trillions of dollars of bond buying struggled to lift growth and inflation for over a decade, tighter monetary policy may be equally inefficient in reining them in. Research by the International Monetary Fund raises concerns about how powerful mega firms are blunting the impact of central banks’ monetary policy.

The IMF research showed that mega firms with market-dominant positions were relatively insensitive to credit policy. It also noted that the COVID-19 pandemic has exacerbated the problem – the larger firms gain more market share from smaller rivals that have gone bust. Find out what the authors of the research recommended to solve the conundrum >

Refinitiv Corporate Treasury Newsbeat

  • Refinitiv creates single API solution for fraud and risk, covering the customer lifecycle across enrolments, payments, change events, compliance, to ongoing KYC and due diligence | The EPIC Platform from GIACT and World-Check are now together and accessible via a single API. The integration brings together the comprehensive risk intelligence from World-Check with the unprecedented capability of GIACT to deliver a multi-dimensional view of consumer and business identity, payments, and compliance risk, across the customer lifecycle. Read more here ->
  • Refinitiv launches USD IBOR Cash Fallbacks prototype to facilitate industry transition from USD LIBOR | Following the Alternative Reference Rates Committee’s (ARRC) March 2021 announcement that it had selected Refinitiv to publish its recommended spread adjustments and spread adjusted rates for cash products, Refinitiv today announced the launch of a prototype rate. The Refinitiv USD IBOR Cash Fallbacks, as the rates will be known, will leverage the firm’s extensive experience in administering benchmarks, such as Refinitiv Term SONIA, to create a family of US Dollar (USD) fallback rates for use in cash markets. Read more here ->

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What are the latest corporate treasury data insights?

August 2021's Corporate Treasury Data Insights from Refinitiv