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When a small group of US bankers sat down a few years ago with Steve Mnuchin, they had a simple message for president Donald Trump’s Treasury secretary. A push was emerging for US lenders to adopt a new risk-free benchmark, the Secured Overnight Financing Rate (Sofr), in place of the London Interbank Offered Rate (Libor), which was slated to be scrapped, and the bankers believed this was a mistake.
Sofr, a measure of the cost of overnight borrowing against Treasuries in the repo market, would not reflect lenders’ real funding costs, the bankers pointed out.
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