The era of risk-free rates has begun and the era of interbank offered rates (and this blog) is ending.
The key LIBOR rates, other than USD LIBOR, are long retired. USD LIBOR continues to exist only as a synthetic rate to aid the transition of tough legacy contracts, and that too will end in a little more than a year. Even the lagging sector of US loans is close to completing its transition from LIBOR to risk-free rates (largely the Secured Overnight Financing Rate, or SOFR). The Loan Syndications & Trading Association reported in late June that, based on data from JPMorgan, it estimated that approximately 65% of outstanding loans had transitioned away from LIBOR. Between now and the end of 2023, as interest periods set prior to 30 June 2023 roll over, that number will continue to increase. The years-long transition of key LIBORs was completed “with little fanfare,” in the words of the LSTA.
So, where is the market? There still are several global benchmarks in the process of transitioning to risk-free rates. Notably active in the current market are Canada (CDOR is expected to cease publication on 28 June 2024), Singapore (SIBOR is scheduled to be discontinued after 31 December 2024), and Japan (which, having retired JPY LIBOR in 2021, now is consulting on the cessation of Euroyen TIBOR at year-end 2024). However, the Financial Stability Board notes that the “final major milestone in the LIBOR transition” ended in June 2023 with the cessation of USD LIBOR.
We have appreciated the opportunity to keep you abreast of this important and monumental work, and our related analysis, for the last three year, but the substantial completion of the transition has led us to retire this blog. After this final post, the blog will remain here for future reference but we will continue to monitor the market actively, and report on market developments regularly, via our IBOR Digest. Please continue to join us there and thank you for your readership over the years.