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GC Asia
Central banks should publish compounded post-Libor rates
One of the biggest, if not the biggest problems facing borrowers in the move away from Libor is a mathematical one. Everyone agrees coupons based on the new risk-free rates should be compounded. But no one can agree on how to do the compounding. Central banks could solve this at a stroke.
Borrowers have favoured floating rate note issuance in Sonia and Sofr — the new risk-free rates in sterling and dollars — with a coupon calculation that is compounded over a quarterly payment period.
The European Investment Bank pioneered the move to Sonia-linked issuance in 2018 with a ...Already a subscriber? Login
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