Help & support
RFRs have been identified for all major currencies as an alternative to LIBOR.
Table reproduced from Financial Stability Board website.
Risk-Free Rate movements in RFRs reflect changes in interest rates, whereas movements in LIBOR reflected both changes in interest rates and bank funding costs. By using a rate that is more closely aligned with actual interest rate movements, you may be better able to manage your interest rate exposures, and not be exposed to sudden spikes in bank funding costs.
RFRs are overnight rates. Therefore an RFR ‘interest rate’ or ‘coupon rate’ for an interest period will typically be based on an average or a compounding of daily observations of the RFR throughout the interest period and is therefore determined at the end of the calculation period. In contrast, LIBOR was a forward-looking “term” rate that sets the interest rate or coupon rate at the beginning of the interest period. Forward looking RFR term rates are available in the GBP, USD, and Yen markets but their use is limited. In the sterling market UK, Term SONIA may be used for trade finance and export finance facilities but is not intended for wider use in the institutional loan market. In the USD market, Term SOFR may be used for most types of lending facilities and the derivatives used for hedging these facilities. Term SOFR derivatives are not to be used in the inter-dealer market. This means that our pricing of ‘Term SOFR’ derivatives will be different from our pricing of derivatives that reference SOFR compounded in arrears.
Note: These links are not comprehensive and do not cover all industries, supervisors or all of the issues associated with LIBOR transition.
The information in this document might change. This information is published solely for information purposes and is not to be construed as a solicitation, an offer or recommendation by CommBank. The information may be incomplete or not up to date and may contain errors and omissions. It must not be relied upon as financial product advice and is not investment research. As this information has been prepared without considering your objectives, financial situation or needs, before acting on the information you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. We believe that this information is correct at the time of publishing and any opinions, conclusions or recommendations are reasonably held based on the information available at the time of its compilation but no representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any statement made.