Thread by @TomStark913

I've been out of the game a while, #SOFR set to replace the #LIBOR.
Wow.

This actually makes some sense to me. Secured Overnight Financing Rate is recorded though the Federal Reserve. I haven't looked much into it, seems very similar to the prime rate from what I have seen as of yet.
apps.newyorkfed.org/markets/autora…

I always wondered why the London International Bank offered Rate was such a dominate index in American banking. Sometimes COFI (cost of funds index) or a few various Treasury indexes would pop up but its almost always the Liber.

For the financially illiterate, where you most commonly see these used is adjustable rate mortgages...or any instrument with an APR or APY that changes with time.

How rates adjust; You have a margin, a set number established and fixed at closing along with an index. Such as Liber, COFI, various US Treasury indexes and now SOFR I assume. These values change regularly, often daily, following whatever data the index is tied to.

When your mortgage (or whatever APR or APY instrument) is set to adjust, the value of your pre-determined index at that moment is added to your margin and you have your new rate for whatever contractual period. (usually 6 months.)

As us can probably tell, your margin is very important and lower the better if paying a rate, higher if receiving yield. Better be familiar with the trends of your index too. Sometimes you can choose, but once you do, often, that's it. Locked in.

Yeah... The political circus stench got a bit pungent. Hopefully much of donkey dung gets cleaned out this week.

Next few days would be good to step back for reasons of sanity. The monkeys are in full throttle out of their cages flinging A LOT of 💩 right now.