(Bloomberg) — The biggest issuers of bonds tied to the benchmark tapped to replace U.S. dollar Libor are suddenly pulling back. That’s a potential blow to efforts by regulators to wean America’s financial system off a much-maligned reference rate.
The Federal Home Loan Banks, which have priced about $170 billion of debt tied to the Secured Overnight Financing Rate since its inception in 2018, have virtually turned off the spigot in recent months. They’ve sold roughly $13 billion of SOFR-linked notes since the start of November, down from more than $70 billion over the preceding three months, according to data compiled by Bloomberg.
Market watchers say the change of tack is unlikely an indictment of SOFR itself. Rather it may simply be the lenders capitalizing on shifts in investor demand. But they also note the vital role these banks — which support housing, economic development and infrastructure projects — have played as standard-bearers in the nascent SOFR market. And there is a risk to wider adoption among issuers should they keep retrenching.
Suraj Shrestha is an associate at Harborside Partners. He has been taking the lead role on research projects; to develop and implement online marketing strategies for search engine optimization and social media marketing. He is one of the core parts for helping to grow business revenue and the company’s online presence.