Two new heavyweights join the Risk Free Rates scrum

01 November 2019

Phil LloydHead of Market Structure & Regulatory Customer Engagement

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Our Risk Free Rates (RFR) Calculator now also supports SOFR, €STR and a variety of additional calculation options

With all eyes on the Rugby World Cup at the weekend, two new heavyweights join the RFR scrum on RealisedRate.com. Following Howzat? in July when we launched the SONIA calculator, we can now announce that our Risk Free Rates (RFR) Calculator also supports SOFR, €STR and a variety of additional calculation options.

€STR - the Euro short-term rate (€STR) has only been published by European Central Bank since 2 October 2019 - see our note What's in a name change? - and RealisedRate.com is the first site to support compounding calculations using the new rate. London Clearing House started supporting clearing of €STR swaps on 21 October.
SOFR - the Secured Overnight Financing Rate (SOFR) is also now supported in the calculator, and to aid with understanding some of the different conventions in use in the US, we have added a 'Backward Shift' calculation option for lagged rates. Based on your feedback and market developments we will look to add other convention options such as Lockout and Simple Averaging in the future.
SONIA - the conventions in use for SONIA swaps and FRNs have been very consistent and the loan market has matched bonds so far. To help explain how a SONIA Interest Rate Swap with a 5 day reset lead would be calculated we have drafted an Example Term Sheet. This sets out how we would amend the standard International Swaps and Derivatives Association terminology to cope with the lag and the relevant Calculation Period.

Click on the image below to see the new features with help on the Calculation Details link. You can now set spread and notional to get a payment calculation, and select holiday calendars, day count convention and reset type for lagged rates.

We will continue to listen to your feedback and develop this tool further to meet the needs of the industry as it transitions away from LIBOR to RFRs. Let us know what you think via our survey or by contacting RFR@natwestmarkets.com.

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