SOFR basis tightens on ‘big bang’ auction disclosure

Indicative auction portfolio unveiled by LCH shows discount risk heavily skewed to liquid end of curve

LCH-offices-in-Aldgate
LCH offices in London's Aldgate
Photo: Brett Gamston

The price difference between long-dated interest rate swaps linked to the secured overnight financing rate, or SOFR, and the effective federal funds rate came off all-time highs today (September 18) after the largest clearing house indicated an auction of basis swaps forming part of October’s ‘big bang’ discounting switch will be smaller than some participants feared.

The basis between 30-year SOFR and 30-year Fed funds swaps narrowed by 1 basis point today to 7.25bp in mid-morning New York

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