Traders back SOFR derivatives as repo hedge

Isda AGM: Market participants say products linked to the rate could mitigate quarter-end spikes

SOFR competition montage

Read all our Isda AGM coverage here.

Barclays and MetLife traders agree derivatives linked to the US secured overnight financing rate, or SOFR, could be a good hedge for the now-traditional quarter-end spikes in the repo rate.

SOFR blends three different US repo rates, which tend to jump at quarter ends as banks shed balance sheet exposures to minimise capital requirements. For instance SOFR climbed nearly 30% over the final quarter of last year, and 10% at the end of the first quarter of 2019

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