What are LIBOR and SOFR?
Mar 10, 02:03

You must have seen these acronyms in the news of late. To put simply, LIBOR and SOFR are benchmarks against which global banks mark their transactions. LIBOR, London Inter-bank Offered Rate, is the interest rate average at which major London banks borrow in the London inter-bank market. Globally other banks too use this benchmark. But, LIBOR will now give way to SOFR which is secured overnight financing rate--a measure of the cost of borrowing cash on an overnight basis in the US Treasury repo markets. The transition from LIBOR to other alternative reference rate was confirmed by the UK Financial Conduct Authority (FCA) on 5 March. Indian banks too have started using SOFR.

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