SOFR basis blows out amid CCP discounting changes

Rate cuts may have exacerbated discount risk as basis swap opt-outs move deeply in-the-money

dollar cut

The price difference between longer-dated interest rate swaps benchmarked to the secured overnight financing rate (SOFR) and the effective federal funds rate (EFFR) has tripled since mid-June.

At 30-year maturities the SOFR-EFFR basis jumped from two basis points on June 15 to a high of 7.8bp on July 21, according to Bloomberg data. The basis now sits at 6bp.

Interest rate strategists say the widening is likely a result of dealers and hedge funds positioning for an expected spike in the SOFR

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: