Wednesday, March 10, 2021

LIBOR Termination Extended

The administrator of the London Interbank Offer Rate (LIBOR) has extended the termination of some tenors until mid-2023 to allow users more time to change to another reference rate. However, the 1-week and 2-month U.S. dollar LIBOR rates will end on December 31, 2021. In the U.S., SOFR appears to be the new standard, but SOFR is not without it's own issues. SOFR does not allow treasurers to estimate forward interest rates, a major drawback. Even with this shortcoming, companies need to transition from LIBOR before it runs out.