SOFR

SOFR (Secured Overnight Financing Rate): The Secured Overnight Financing Rate, or SOFR, is a benchmark interest rate for dollar-denominated derivatives and loans. The Federal Reserve Bank of New York began publishing the SOFR in April 2018 as part of an initiative to identify a set of alternative reference rates to the London Interbank Offered Rate (LIBOR).

SOFR is based on transactions in the Treasury repurchase market, where banks and investors borrow or loan Treasuries overnight. The rate is calculated as a volume-weighted median of transaction-level tri-party repo data collected from the Bank of New York Mellon as well as GCF Repo transaction data and data on bilateral Treasury repo transactions cleared through Fixed Income Clearing Corporation's (FICC) Delivery-versus-Payment (DVP) service.

As LIBOR is set to be phased out by the end of 2021, SOFR is one of the leading contenders to replace it. It is seen as a more reliable index as it is based on data from observable transactions rather than estimates submitted by banks. In the context of real estate, a shift to SOFR could affect the terms of floating-rate loans, which often use LIBOR as a benchmark.