Interest Rates

Is the market headed to a world with multiple reference rates?

As LIBOR winds down, one derivatives trader worries its replacement will do a poor job hedging risks in turbulent times: "For somebody who wants to hedge their borrowing costs, [SOFR] leaves a lot to be desired."

Ready or not, businesses must transition financial contracts away from the benchmark rate. Here's an update on what to expect.

The U.S. Congress agrees to a solution for the LIBOR crisis, which would automatically transition contracts to a new benchmark.

The Fed won't consider interest-rate increases until the labor market heals further, even though inflation may run hot for months.

In fact, Fed Vice Chair Richard Clarida believes the conditions required to begin tapering Fed bond-buying have "all but been met."

The Walker & Dunlop loan will use SOFR from the start, rather than launching with LIBOR and switching benchmarks after 2021.

Even as the Fed considers tapering asset purchases and raising interest rates, its improved communications make a 2013-like market response unlikely.