More than $200 trillion worth of financial contracts reference the London Interbank Offered Rate (LIBOR). Due to changes in the financial markets, LIBOR is expected to be phased out by 2021 as a benchmark interest rate. How does a monumental change like that happen in a few short years? Many leaders in the financial markets have been laying the groundwork for the change for several years. In 2014, the Federal Reserve formed the Alternative Reference Rate Committee (ARRC) to assess alternatives to LIBOR. In 2017, the ARRC identified the Secured Overnight Financing Rate (SOFR) as its recommended alternative.
FHLBank Topeka, along with the rest of the FHLBank System, is committed to helping our industry and our members prepare for the shift to SOFR in the coming years. One of the first steps we took as a System was to issue $4 billion in debt tied to SOFR on Nov. 13.
Read this Politico story outlining the reasons behind this issuance.