LIBOR Benchmark Consigned to History
(30 June 2023 – Global) The London Inter-Bank Offered Rate (LIBOR) will have its last fixing on Friday, ending its 50 year stretch as the standard reference rate for trillions of dollars of assets globally.
LIBOR gradually became the benchmark to determine the cost of borrowing across the globe, from interest-rate swaps and collateralized loan obligations to student loans and mortgages.
Following the global financial crisis in 2008 regulators found many of the world’s biggest banks were manipulating the reference to their advantage, heralding the steady unwinding of the reference rate to be succeeded by the Secured Overnight Financing Rate (SOFR) in the United States and many other markets. SOFR is designed to be accessible while also less vulnerable to exploitation.
“Changing something as fundamental as Libor has been a great disruption to the status quo, and such transitions in the history of finance have been quite limited. People are keen to move on to the new rate and market conventions, and begin to settle into new routines” commented TD Securities Head of US Rates Strategy, Gennadiy Goldberg.
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