IFLR USD Libor Survey 2021

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With two of the seven USD Libor maturities discontinued at the end of 2021, and the other five – overnight, one, three, six and 12 months – to follow in June 2023, we surveyed the market to gauge readiness

The time has come, the end is nigh.

After several years of relentless reporting and countless twists and turns in what has been a long-winded transition process, to say the least, Libor is, truly, going away.

With two of the seven USD Libor maturities discontinued in just a month from now, and the other five – overnight, one, three, six and 12 months – to follow in June 2023, we felt now was a good time to gauge market readiness for the Libor transition.

We received an overwhelming response to the survey and have generated some very interesting data points. We tried to cover as much ground as possible in our questions, ranging from overall readiness, to credit-sensitive and term rates usage, to legacy contracts, to overall management of the transition by the authorities.

While some of your responses were largely in line with our reporting and were a confirmation of the patterns we have observed over the past few months and years, others shed a brand new light on previously uncovered aspects of this transition.

For example, we learnt that over half of respondents think the challenge of issuing no new Libor contracts beyond this year would go smoothly or with limited disruption, while the rest think it will cause significant disruption or simply aren’t ready for it.

Furthermore, our survey results showed that a vast majority – roughly 75% – disapprove of the Alternative Rates Reference Committee (ARRC) and the Fed’s approach and management of the transition, while the rest moderately or strongly approve.

Meanwhile, we got further confirmation that only a small portion of the market will be using SOFR as sole replacement rate, and that Ameribor and the Bloomberg Bank Yield Index (BSBY) were the most popular credit-sensitive alternatives to Libor. Roughly 75% of you also told us that tough legacy would represent a moderate or major issue in the US, while nearly 70% said the passage of the legacy bill at the Federal level is a necessity.

Starting today, we will be releasing a series of reports looking at the results from various angles.

These will be centred around: overall market readiness ahead of no new Libor at year-end and no Libor at all by June 2023; the coexistence of multiple rates as a replacement to USD Libor; how significant the legacy issue is for the US market and whether federal legislation for legacy contracts is necessary; and how the market assesses the authorities’ handling of the transition process to date.

Thank you for your continued interest in our publication, and we look forward to engaging you further on all these topics.

Enjoy the report, the IFLR Team

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