medium · Debt Capital Markets bond-instruments-structures
What is the primary difference between SOFR and the now-discontinued LIBOR benchmark?
- SOFR is only used for corporate bonds, while LIBOR was used only for government auctions.
- SOFR is a forward-looking term rate set for 3 months, while LIBOR was strictly an overnight rate.
- SOFR includes a bank credit risk premium, whereas LIBOR was considered entirely risk-free.
- SOFR is a secured rate based on actual repo transactions, while LIBOR was an unsecured rate based on expert judgement.
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