World Bank completes first SOFR bond hedge

The largest SOFR swap trades to date were executed on August 13

World Bank hedged its risk in the SOFR swap market despite thin liquidity

The World Bank has become the first borrower to hedge a bond issuance with an interest rate swap linked to the Secured Overnight Financing Rate (SOFR).

The international lender sold a $1 billion, two-year floating rate note (FRN) benchmarked to SOFR on August 14 and entered into a float-to-float trade to swap its SOFR exposure back to three-month Libor.

Andrea Dore, head of the capital markets team at the World Bank, says the organisation was able to hedge the issuance despite thin liquidity