Does SOFR-linked debt cost borrowers more than LIBOR-linked debt?

Sven Klingler and Olav Syrstad

No 2023/7, Working Paper from Norges Bank

Abstract: We investigate if the benchmark transition from London Interbank Offered Rate (Libor) to Secured Overnight Financing Rate (SOFR) affects the costs of borrowing floating rate debt. The primary market for dollar-denominated floating rate notes (FRNs) provides an ideal laboratory to study these e ects. Comparing the spreads of FRNs linked to LIBOR and SOFR, issued by the same entity during the same month, we find a significantly lower yield spread for SOFR-linked debt after adjusting for the maturity-matched spreads from the swap market. In addition, despite identification challenges, we observe a quantitatively similar pattern in the syndicated loan market.

Keywords: Benchmark rates; floating rates; financial regulation; LIBOR; SOFR. (search for similar items in EconPapers)
JEL-codes: E43 G12 G18 G29 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2023-05-25
New Economics Papers: this item is included in nep-inv
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https://hdl.handle.net/11250/3073368

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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2023_7

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