Term SOFR gains ground in Asia

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IFR – Chien Mi Wong | 2/24/2023

Less than five months before Libor is phased out on June 30, term SOFR is emerging as a preferred benchmark for US dollar loans in Asia given its similar characteristics to its predecessor.
BW Take: The obvious challenges of calculating and administering a backward looking compounded SOFR rate with end-of-period interest calculations have led to an increase in the adoption of Term SOFR across Asia. Despite this move to Term SOFR, concerns over license agreements and reporting obligations not to mention credit spread adjustments, could expand these options to include credit sensitive rates.

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BSBY Swaps ADV: Notional value traded of bilateral and cleared interest rate swaps referencing Bloomberg Short-Term Bank Yield Index divided by the number of trading days in each month (i.e. Average Daily Volume)

CME BSBY Futures ADV: Futures contracts ($1 million notional) traded of Three-Month Bloomberg Short-Term Bank Yield Index (BSBY) Futures on CME divided by the number of trading days in each month (i.e. Average Daily Volume)

Source: Clarus Financial Technology data

3M Libor: 3-Month USD Libor (US0003M Index)

3M BSBY: 3-Month Short-Term Bank Yield Index (BSBY 3M Index)

O/N SOFR: Secured Overnight Financing Rate (SOFR Index)

3M Term SOFR: 3-Month CME Term SOFR (SR3M Index)