Wed, Oct 20, 2021
This month the FCA announced that the synthetic LIBOR rates to be available for Sterling and Yen after December 31, 2021 would be available for a much wider range of products than previously expected, prompting a sigh of relief from many LIBOR users still grappling with the transition. Only cleared derivatives will not be allowed to use the computed rates which will allow some of the legacy book to expire without transitioning as well as more time for the contracts that need to be amended. However new issuance in LIBOR will not be permitted so firms will still need to ensure that their infrastructure can handle the new Risk Free Rates (RFRs) and we would expect that the scope of the synthetic indices will narrow over time.
In the US SOFR has seen a pick-up in adoption as well as progress in the SOFR first program, cementing its status as the preferred replacement for USD LIBOR.
As we enter the fourth and final quarter of LIBOR as we know it, the clock is still ticking down and the regulators keep the pressure on to execute the transition while at the same time provide mechanisms to ensure that it happens in an orderly fashion.
General News
A U.S. Companies Pick Up Adoption of Libor Alternative SOFR, Wall Street Journal
Market Details
Market Participants Must Act Now as US Libor Ends, The Banker
CLO's Near-Record Run Risks Faltering on Libor Transition Chaos, Bloomberg
Regulatory Updates
Benchmark Strategies Forum: Scott O’Malia Opening Remarks, ISDA
Further Arrangements for the Orderly Wind-down of LIBOR at end-2021, FCA
Across-the-Curve Credit Spread Indexes (AXI), SOFR Academy
Poland Presses EU for Quick Fix to Expiring Franc Libor Rates, Bloomberg
The replacement of London Inter-Bank Offered Rate (LIBOR) is a multiyear transformation, and the impact will be a seismic shift in core operations, vendor relationships and loan products.
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