NEW YORK–(BUSINESS WIRE)–#AXI—SOFR Academy Inc., a digital education and data provider, announced that it has recently completed a series of meetings with United States government agencies regarding the Across-the-Curve Credit Spread Index known as AXI. The index is a robustly defined, forward looking credit-sensitive spread added to the Secured Overnight Financing Rate (SOFR) to support the transition of loan products away from the London Interbank Offered Rate (LIBOR).
Meetings included those with representatives of member agencies of the Financial Stability Oversight Council. Marcus Burnett, Chief Executive of SOFR Academy, said, “It made sense to invest time with market regulators on this important topic.” The U.S. Official Sector have said that the same deficiencies exposed with LIBOR must not be replicated in the development of a credit sensitive index or spread. “There were a few key messages that we highlighted: Firstly, that AXI is not a LIBOR-like rate. The primary input data for AXI are a deeper pool of unsecured bank funding transactions with maturities out to five years. Second, because AXI automatically adapts to future changes in bank funding composition, its robustness and representativeness are sustained over time. Third, because AXI is a credit spread add-on to SOFR and not a standalone rate, it further reinforces that SOFR is a bedrock benchmark rate and will promote its adoption,” added Burnett.
In a letter to the Alternative Reference Rates Committee (ARRC), SOFR Academy committed to operationalizing AXI in a considered and measured way that incorporates feedback and guidance from a wide range of stakeholders and prioritizes the stability of the global financial market. This may involve alignment with the ARRC’s Key Principles for a forward-looking SOFR Term Rate, and licensing AXI initially for use in derivative markets only for end-user facing derivatives intended to hedge cash products that reference SOFR + AXI.
About the Across-the-Curve Credit Spread Index (AXI)
AXI was discussed during the Federal Reserve Bank of New York’s Credit Sensitivity Workshops, which were intended to explore a credit sensitive add-on to SOFR. AXI was conceived in an academic paper by Professor Antje Berndt, Professor Darrell Duffie, and Dr. Yichao Zhu. Qualitatively, the index is a measure of the recent cost of wholesale unsecured debt funding for publicly listed U.S. bank holding companies and their commercial banking subsidiaries. Quantitatively, the index is a weighted average of credit spreads for unsecured debt instruments with maturities out to five years, with weights that reflect both transactions volumes and issuance volumes. To learn more about AXI, please visit: SOFR.org/AXI
About SOFR Academy
SOFR Academy is a U.S. based digital education and data provider. SOFR Academy’s panel of advisors includes academics from Harvard University, the MIT Sloan School of Management, the University of California Berkeley, New York University, Tsinghua University, and Australian National University as well as experienced financial services professionals. The Firm provides educational services to corporations, financial institutions, governments, regulators, and individuals on important topics that impact the global economy. It is also operationalizing AXI as a credit spread add-on for SOFR for use in lending and derivative markets. SOFR Academy is a member of the Loan Syndications and Trading Association (LSTA).
About the Secured Overnight Financing Rate
SOFR is published by the Federal Reserve Bank of New York and is subject to The New York Fed Terms of Use. The New York Fed has no liability for your use of the data. AXI is not associated with, endorsed, or sponsored by The New York Fed.
Contacts
Media:
Jorge A. Cosano-Martinez
Telephone +1 855 236 6106
press@SOFR.org
