Refinitiv Spread-Adjusted Fallback Rates Become Production Benchmarks

With fewer than 30 days until the cessation of LIBOR, another piece of the puzzle has fallen into place for U.S. dollar LIBOR transition. On 30 November 2021, Refinitiv, the ARRC-preferred publisher of spread-adjusted SOFR-based fallback rates, announced that its USD IBOR Institutional Cash Fallbacks (“Institutional Fallbacks”), launched on 11 August 2021 as prototype rates, are now available for use as production benchmarks.

Refinitiv also announced on 30 November that it expects to launch 1-week and 2-month settings of its USD IBOR Consumer Cash Fallbacks (“Consumer Fallbacks”) on 3 January 2022, pending its board approval.

The publication of production benchmarks is intended to facilitate a smooth and stable transition from LIBOR to SOFR by “provid[ing] market participants, including lenders and borrowers, with an industry standard agreed rate, which can clearly and easily be referenced in contracts.”

The Institutional Fallbacks are available for use now and include the following variations:

• SOFR compounded in arrears, daily simple SOFR, and SOFR compounded in advance, with term SOFR to follow in due course;
• Available with and without a lookback, observational shift, and lockout; and
• published in up to 7 tenors including overnight, 1-week, 1-month, 2-month, 3-month, 6-month and 12-month.

In contrast, the Consumer Fallbacks currently are based on SOFR compounded in advance only, gradually introduced during the 12 month transition period, and available with and without a floor. Subject to approval by Refinitiv’s board, the Consumer Fallbacks for 1-week and 2-month settings are expected to be available for use from 3 January 2022, with 1-, 3-, and 6-month settings scheduled for use from 1 July 2023.

The ARRC applauded the availability of the Institutional and Consumer Fallbacks, noting that the publication “will ensure that the ARRC’s recommended spread adjusted rates for cash products can be effectively accessed and implemented by all relevant market participants,” and “gives market participants another important tool to ensure the stability of legacy contracts that contain ARRC-recommended fallback language.”

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