Lastest BSBY News
Bloomberg BSBY Bulletin – Underlying Volumes, Resiliency in Periods of Stress and Current Landscape
Bloomberg LP | 7/11/2023
Bloomberg’s bulletin provides a detailed performance overview of the Bloomberg Short-Term Bank Yield Index (BSBY) from the beginning of ’22 inclusive of historic and recent periods of market stress. Daily underlying volumes across published tenors and details of the waterfall process that can be utilized if liquidity is challenged are provided as is detail on the existing BSBY user and product landscape and its use across the lending markets.
BW Take: BSBYwatch was borne out of the recognition of the market’s need for a stable, credit-sensitive rate supported by the deep and robust transaction data that sets it far apart from Libor. This report highlights how BSBY is the correct reference rate for transactions where Risk Free Rates with the added cost of credit spreads and a restrictive swap market are simply inappropriate.
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BSBY/AMERIBOR – Not a Great July 4th
Substack.com (R) – Ed Ivey | 7/11/2023
IOSCO doesn’t have any actual legal authority. No one is going to jail for using BSBY or AMERIBOR – i.e., they cannot deem a rate “not IOSCO compliant” thereby outlawing its use. IOSCO sets principles, then someone like Bloomberg hires an auditor to review their rates and determine whether, in the opinion of the auditor, BSBY satisfies IOSCO’s principles. In fact, that is exactly what BSBY did do.
BW Take: A very good synopsis of where we are now with CSRs including the lack of IOSCO regulatory authority who incidentally have not provided any detail on the review that supported their recent decision on SOFR rate alternatives. IOSCO has set the stage for a practical debate on ALL Libor replacements and that’s a very good thing.
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Iosco deals hammer blow to BSBY, Ameribor
Risk.net ($) – Helen Bartholomew | 7/4/2023
The role of credit-sensitive rates in the post-Libor landscape has been thrown into doubt after the International Organization of Securities Commissions ruled that they do not comply with international benchmark standards.
BW Take: Despite an independent audit concluding BSBY’s compliance with the 19 core IOSCO principles, this latest ruling, while not a ban, will re-examine the makeup and volume underpinning CSRs and defined use cases.
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IOSCO Statement on Alternatives to USD Libor
The International Organization of Securities Commissions (IOSCO) | 7/3/2023
The IOSCO Review of Alternatives to USD Libor assessed the extent to which 4 benchmarks developed as potential substitutes for USD LIBOR – two credit sensitive rates and two Term SOFR rates, have implemented IOSCO’s 2013 Principles for Financial Benchmarks. In the report, varying degrees of vulnerability of concern with each rate’s implementation of the Principles were identified along with areas for improvement.
BW Take: A well-documented and data-rich credit sensitive rate seems essential to the health of the financial system. IOSCO are likely looking to refine the requirements and use cases to assure the market embraces a robust and stable solution.
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Curb use of dollar Libor alternatives to Fed rate, says watchdog
Reuters – Huw Jones | 7/3/2023
The use of four dollar-denominated alternatives to the now scrapped Libor interest rate need restrictions to avoid threatening financial stability, a global securities watchdog said on Monday.
BW Take: Concerns that the volume underpinning CSRs become vulnerable during periods of market stress seem to also apply to a bank’s ability to provide SOFR-based credit lines during times of stress.
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As Libor ends, credit-sensitive rates face day of reckoning
Risk.net ($) – Helen Bartholomew | 6/29/2023
On June 30th, trillions of dollars of cash and derivatives contracts are moving over to SOFR. Firms hoping to use credit-sensitive alternatives, such as BSBY and Ameribor, are still waiting for IOSCO to rule on whether these benchmarks comply with its standards, which are widely regarded as the minimum for regulated firms.
BW Take: To cut through the noise, IOSCO might want to consider the logic of why $900 billion in overnight transactions presents a better baseline reference rate than $600 billion across a diverse pool of maturities and transactions. To borrow from a famous quote, reports of BSBY presenting inverted pyramid concerns have been greatly exaggerated.
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BSBY Syndicated
Loan Scorecard
150
Loan Count
$
2000000000000
Loan Notional Totals
*Data limited to syndicated loans, as bilateral loan activity is less readily available as of 28-Aug-2023
Helpful Links
- What is BSBY?
- Bloomberg BSBY Fact Sheet
- Bloomberg BSBY Homepage
- Bloomberg BSBY Whitepaper
- CME Term SOFR
- Eris Innovations
- CME Eris Swap Futures
- Fed Statement on Reference Rates for Loans
- BSBY-Investopedia
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