Three bonds linked to the secured overnight financing rate
(Sofr) index have launched over the course of the past month.
The first, a $6 billion floating rate note July 26 issuance by
the Federal National Mortgage Association, the US
government-sponsored mortgage lender commonly known as Fannie
Mae, broke ground amid hope that it would encourage a broader
acceptance of securities that are indexed to Sofr.
The second transaction came in early August, issued by the
World Bank, and on August 20 Credit Suisse became the first
investment bank to issue debt tied to the benchmark.
The Fannie Mae bonds pay a quarterly coupon. The coupon
calculation is based on a simple average of the daily Sofr rate
plus a spread. Specifically, the rates used in the bonds coupon
calculation reset daily with a one business day look back: by
way of example, on the reset date of July 31, the...