Glossary term
SOFR (Secured Overnight Financing Rate)
The US risk-free reference rate that replaced LIBOR; the basis for pricing floating-rate instruments.
SOFR (Secured Overnight Financing Rate) is the benchmark U.S. dollar risk-free rate, based on overnight Treasury repo transactions, that replaced the discredited LIBOR. It underpins the pricing of floating-rate loans, derivatives, and a vast web of financial contracts. SOFR's transaction-based design makes it harder to manipulate than the survey-based LIBOR it succeeded. See Fed Funds Rate and Money Temperature 101.