Tuesday, 21 September 2021

SOFR first - two months on

Presented withou comments this week.

Comments on ESTR, SARON, and SOFR to come later!

Tuesday, 14 September 2021

Decrease in SOFR activity

We are not certain of its origin, but certainly a significant decrease in SOFR activity last week. The lowest in the "SOFR First" era at LCH and lowest in 5 weeks for the ISDA reported figures. But the ISDA reported figures indicated a relative increase with respect to LIBOR.

It is not clear what the origin of this is. One potential explanation is market moving out of LIBOR but not to SOFR.

CME futures on BSBY provide a view of market price discovery of SOFR v credit sensitive rates. For those that have not yet agreed on the fallback for legacy LIBOR trades, that opens a window on valuation impacts.

This makes Marc's cautionary tale published in January 2020 edition of Risk even more tangible. It is now possible, to some extend, to measure the exercise value of the protocol option. Marc mentioned the "Fallback protocol as an option" in the past, in particular in the blog "ISDA Fallback as an option".

For the (low volume for BSBY and SOFR) trades on the September 2023 contract (first after USD-LIBOR cessation), the spread LIBOR-SOFR is 27 bps and the spread BSBY-SOFR is 19 bps. The first one is roughly in line with the CME Eurodollar futures fallback using ISDA/Bloomberg spread (26.161 bps), the second one provides the cost of protocol signature for a September 2023 fixing: losing or making 8 bps. Lets wait for more volume on the longer term part to assess more of the value transfer. We will try to provide more data on BSBY in a forthcoming blog.

Wednesday, 8 September 2021

SOFR first - six weeks on

No big push since "SOFR First" date six weeks ago. Quite flat volume, both on the weekly figures and on the monthly figures. Using ISDA figures, SOFR outright OIS volumes still less than 10% of LIBOR volumes.

Workshops with CQF insitute

Marc Henrard will present two workshop with the CQF insiture.

The first one will take place on Wednesday 6 and Thursday 7 October 2021.

The second one will take place on Tuesday 9 and Wednesday 10 November 2021.

The agendas of the workshops can be found on the webpages references above.

Don't hesitate to contact us if you want to organise similar workshops in-house.

Tuesday, 31 August 2021

SOFR first - five weeks on

No big push since "SOFR First" date five weeks ago. Using ISDA figures, SOFR outright OIS volumes still less than 10% of LIBOR volumes.

Wednesday, 25 August 2021

SGD SORA figures

On popular demand, we also publish some SGD SORA figures. 

Figure 1. Monthly figures (to July 2021) for SORA clearing at LCH.

Figure 2. Weekly figures (to 20 August 2021) for SORA clearing at LCH.

Tuesday, 24 August 2021

Workshop at the 4th Interest Rate Reform Conference - 19 October 2021


Marc Henrard will present a workshop at

The 4th Interest Rate Reform (Ibor Transition) Conference

which will take place on-line from Tuesday 19 to Thursday 21 October 2021. The agenda of the conference can be found on the organizer web site:

Marc's workshop will take place on Tuesday 19 October from 13:00 to 17:00 and will be titled  

LIBOR transition: almost there and so much to do for quants.


  • Liquidity in ESTR, SONIA and SOFR
  • Multiple fallbacks, multiple market risks, one spread to rule them all!
  • ISDA fallback spreads v recent LIBOR/SOFR data
  • USD: alternatives to SOFR - AMERIBOR, BSBY, ICE BYI, AXI, CMT
  • Hidden issues

ESTR and SARON: weekly figures

Weekly figures for ESTR and SARON at LCH.

In both cases, no real progress over the summer.

Monday, 23 August 2021

SOFR first - four weeks on

Looking at last week SOFR numbers, the only description that comes to mind is "unchanged to slightly lower". No big push since "SOFR First" date four weeks ago.

LCH figures slightly lower, ISDA figures slightly lower, ISDA outright SOFR as portion of LIBOR slightly lower.

Sunday, 22 August 2021

USD transition - quick spreads review

We still have roughly four months to go to the LIBOR transition. USD-LIBOR rates will still be published for 18 months after that, but the goal is to stop adding more LIBOR exposure from the beginning of 2022 onward.

A fallback mechanism for legacy LIBOR has been proposed by ISDA, based on a historical spread approach between the in-advance credit risky LIBOR and the in-arrears secured SOFR. The results of that historical spread computation has been announced on 5 March 2021. FOR USD-LIBOR-3M, the result was a spread of 26.161 basis points.

In USD, other mechanisms to replace LIBOR have been proposed. They include, among others (see this blog for more alternatives) Bloomberg BSBY, CME SOFR Term rates, and AMERIBOR. In this blog we propose recent historical data related to those benchmarks.

The data themselves are IBA USD-LIBOR-3M (2019-01-02 to 2021-08-20), Bloomberg BSBY 3M (2019-01-02 to 2021-08-20), SOFR Term rate 3M (2019-01-03 to 2021-08-19), SOFR compounded using ISDA mechanism (computed from Fed raw data) (2019-01-02 to 2021-05-17), and AMERIBOR 90D (2021-05-17 to 2021-08-20). The SOFR compounded time series are shorter by 3 months due to the in-arrears feature. The AMERIBOR 90D is published only since May this year. The time series are displayed in Figure 1.

Figure 1: Historical rates from beginning of 2019 to today

The drop of rates after COVID-19 pandemic spreads from Wuhan to contaminate the world is clearly visible in the graph at the beginning of 2020. The way the different rates reacted was different.

In Figure 2, we display the spread between LIBOR and the other rates. The BSBY spread has also jumped around that time, but remained contained. The Term SOFR had one big jump that can be interpreted as a market credit concern. At the opposite, the compounded in-arrears ISDA style had two large jumps, probably one due to the delayed nature of in-arrears and one related to credit.

Figure 2: Historical spreads to LIBOR from beginning of 2019 to today.

For the period in the graph, the statistics for the spreads are an average of 5 bps and a standard deviation of 4.6 bps for BSBY. For SOFR Term, the statistics are an average of 23 bps and a standard deviation of 21 bps. For SOFR in-arrears with ISDA methodology, the statistics are an average of 32 bps and a standard deviation of 30 bps. For AMERIBOR 90D, the statistics are an average of -1.7 bps and a standard deviation of 1 bps; the period of reference is very different and those statistics cannot be compared to the previous ones that are reported on a substantially more unstable period.

The fallback method is based on a fixed spread of 26.161 bps (and an implicit standard deviation of 0).

Added 2021-08-28: The spread versus term SOFR is presented in Figure 3. LIBOR, BSBY and Ameribor spreads varied widely but are all positive, except one date for LIBOR (2 March 2020). Over the last year, the spreads have been well below the ISDA spread fixing.

Figure 3: Historical spreads to term SOFR from beginning of 2019 to today.