SOFR, ESTR, SONIA, AONIA, CORRA, SORA: The LIBOR Replacements Are Lining Up

Unless you have been living under a rock these past few years, you probably know about the LIBOR Cessation–and new reference rates lining up to replace the beloved but tainted and now mistrusted London rate. 

In the US, effective January 2022, Libor was no longer used to issue new loans. The key benchmark rate was replaced by the Secured Overnight Financing Rate (SOFR), which many experts consider a more accurate and secure pricing benchmark. Furthermore, June 2023 marks the last publication of LIBOR USD Tenors. However, the transition away from LIBOR does not come without turbulence. LIBOR had been so established in loans that the industry had become very dependent on the rate. Synthetic LIBORs have allowed lenders to delay the full transition into 2023 and work on moving away from legacy contracts still based on LIBOR. 

The industry has been scrambling to adopt new rates such as the Overnight SOFR and Term SOFR. 

We have supported SOFR for quite some time and it has been rapidly adopted by our clients.

However, SOFR also comes with its own limitations. Lenders must also look to a variety of alternative reference rates based in different currencies. Within interbank loans, Overnight Index Swaps have taken center stage in place of the old Interest Rate Swaps. 

We have added several new OIS (Overnight Indexed Swap) rates based on Risk Free Free Reference Rates in our XigniteMoneyMarkets service. So far we have added OIS rates based on:

• SOFR (Secured Overnight Financing Rate Data) 
• ESTR (Euro Short-Term Rate)
• SONIA (Sterling Overnight Index Average)
• AONIA (AUD Overnight Index Average.)
• CORRA (Canadian Overnight Repo Rate Average)
• SORA (Singapore Overnight Rate Average)
• SARON (Swiss Average Rate Overnight)
• TONAR (Tokyo Overnight Average Rate )

You can access these new OIS rates from the following endpoints by appending &FloatingReferenceRate=(insert FloatingReferenceRate) to the end of the URL and selecting OIS as the SwapType. Note that you can only access those rates via REST (SOAP is not supported).

Please use ListSwapRates for a list of valid inputs. Without this optional parameter, the API returns the default swap rate, primarily based on LIBOR rates. 

The following APIs are affected:

• GetSwapRateExtended
• GetSwapRateFamilyExtended
• GetHistoricalSwapRateExtended
• GetHistoricalSwapRateExtendedRange

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