Bloomberg Launches Credit Sensitive Index To Supplement SOFR

Basel Committee Consults on Interest-Rate Risk

Bloomberg announced the launch of the Bloomberg Short Term Bank Yield Index (BSBY) to meet market demand for a credit sensitive index to serve as a supplement to SOFR, and support the global IBOR transition. Bloomberg began publishing BSBY on an indicative basis for the purposes of illustration and analysis on October 15, 2020.

BSBY will be calculated daily and published at 8 am ET, and can be accessed via the Bloomberg Terminal. The index is available for 5 tenors: overnight {BSBYON <GO>}, 1-month {BSBY1M <GO>}, 3-months {BSBY3M <GO>}, 6-months {BSBY6M <GO>} and 12-months {BSBY12M <GO>}. Additional detail on the BSBY methodology can be accessed here.

BSBY is constructed using aggregated and anonymized data that is anchored in transactions of Commercial Paper, Certificates of Deposit, USD bank deposits, and short term bank bond trades — reflecting banks’ marginal funding costs. BSBY includes a systemic credit spread and term structure, and can be used as a supplement to SOFR in the lending market. Bloomberg has been working closely with market participants to solicit feedback on BSBY and will continue to refine the index. Following this beta period of market feedback, Bloomberg plans to license BSBY for use as a financial benchmark via Bloomberg Index Services Limited, Bloomberg’s authorized benchmark administrator.

“We support efforts to promote liquidity in markets linked to the SOFR benchmark, and will continue to implement solutions to facilitate its adoption,” said Umesh Gajria, Head of Index Linked Products at Bloomberg. “Bloomberg’s credit index capabilities and our deep history in the fixed income markets position us well to offer BSBY as a solution to support the industry’s IBOR transition needs.”

Bloomberg delivers a comprehensive suite of solutions to support IBOR transition, including scenario analysis to determine the impact of RFRs on portfolios. On the Bloomberg Terminal, users can also access fallback datasets to identify IBOR-linked securities in their portfolios and trading services using Risk Free Rates (RFRs). In addition, Bloomberg publishes term and spread adjustments for the fallbacks that ISDA intends to implement for certain IBORs.

Source: Bloomberg

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