SOFR vs EFFR: secured and unsecured overnight rates
SOFR prices cash lent against Treasuries; EFFR prices cash lent to banks with no collateral at all. On October 8, 2026 they printed 3.87% and 3.88%.
SOFR and the effective federal funds rate (EFFR) are both overnight dollar rates published by the New York Fed, but they price different loans in different markets. SOFR is the median rate on overnight repo backed by Treasury securities; EFFR is the median rate on unsecured overnight loans of reserves between institutions in the federal funds market. Intuition says the secured rate should be lower, and from 2021 through 2023 it was, by 2 to 4.5 bp on average. But SOFR printed above EFFR on 31.7% of matched days since April 2018, and for 93 business days in a row from August 22, 2025 to January 7, 2026. The gap is set less by credit risk than by who is allowed to lend where, and by the two administered rates the Federal Reserve uses to steer overnight markets.
Two markets, two rates
Definitions below follow the New York Fed's reference rate methodology.
| SOFR | EFFR | |
|---|---|---|
| Loan type | Overnight repo: cash against Treasury securities | Overnight federal funds: unsecured |
| Transactions | Tri-party general collateral repo, GCF Repo and FICC-cleared bilateral (DVP) repo, after trimming the lowest-rate 20% of DVP volume | Overnight fed funds trades reported on the FR 2420 by domestic banks and U.S. branches and agencies of foreign banks |
| Calculation | Volume-weighted median, rounded to 1 bp | Volume-weighted median, rounded to 1 bp |
| Published | About 8:00 a.m. ET, next business day | About 9:00 a.m. ET, next business day |
| Average daily volume, 2026 | $3,099.6 billion | $104.5 billion |
| Latest (October 8, 2026) | 3.87% | 3.88% |
SOFR rests on roughly thirty times as much daily activity as EFFR. EFFR matters because the Federal Open Market Committee targets it: the FOMC sets a range, and EFFR is the market outcome inside it, not the target itself.
Who lends and who borrows fed funds
The federal funds market today is mostly a market between institutions that cannot earn interest at the Fed and institutions that can. A Federal Reserve Board FEDS Note from July 11, 2024 (Anderson and Na) describes it this way: since the global financial crisis, government-sponsored enterprises, "especially Federal Home Loan Banks (FHLBs), have become the primary lenders of fed funds," and they lend there because "they are not eligible to earn IORB on their deposits at the Federal Reserve."
On the other side, the same note finds that U.S. branches and agencies of foreign banks account for the majority of borrowing, with large domestic banks the second largest group. Much of it is an arbitrage: borrow fed funds below the rate the Fed pays on reserves, hold the cash in a reserve account, and keep the difference. That is why EFFR has usually printed a few basis points below the interest rate on reserve balances rather than above it.
Who is in the repo market behind SOFR
SOFR's universe is far wider. It nests the tri-party general collateral trades that make up TGCR, the GCF Repo trades that extend it to BGCR, and bilateral trades cleared through FICC's delivery-versus-payment service. Cash lenders in repo include institutions with no access to interest on reserves, the same kind of institutions that can use the Fed's overnight reverse repo facility. Borrowers are largely those financing Treasury positions. The two markets also share lenders at the margin: the 2024 FEDS Note found that FHLBs shifted some lending from fed funds to repo as Treasury repo rates moved higher. The guide to how SOFR is calculated walks through the segments and the trims, and the percentiles and volume page shows how dispersed the trades are on any given day.
How IORB and ON RRP frame both rates
The Fed does not set either rate directly. It sets the target range and uses two administered rates to keep overnight market rates inside it.
Interest on reserve balances (IORB)
The Reserve Banks pay interest on balances held by or on behalf of eligible institutions in master accounts. The Board describes the IORB rate as "an important tool for the Federal Reserve's conduct of monetary policy." A bank with a master account has little reason to lend reserves overnight for less than it earns by leaving them at the Fed. Fed funds trade around IORB because the lenders in that market (mainly the FHLBs) cannot earn it, and the borrowers can.
The overnight reverse repo facility (ON RRP)
In an ON RRP operation, the Fed explains, the Desk "sells a security to an eligible counterparty and simultaneously agrees to buy the security back the next day." The facility does for its counterparties roughly what IORB does for banks: they "should be unwilling to invest funds overnight with another counterparty at a rate below the ON RRP rate." The 2024 FEDS Note lists money funds, primary dealers and GSEs among the institutions it serves. Because an ON RRP is itself a repo backed by Treasuries, it acts most directly on secured rates such as SOFR.
Put together, the framework gives a rough map. When cash is plentiful relative to the Treasury collateral that needs financing, repo lenders compete for collateral, repo rates sink toward the ON RRP rate, and SOFR sits below EFFR, which is held up near IORB by bank arbitrage. When collateral is plentiful relative to cash, or dealers have less balance-sheet room, repo rates rise away from that floor and can pass EFFR, and even the top of the target range, while fed funds barely move.
Worked example: an administered-rate change with no target changeThe Federal Reserve's June 16, 2021 implementation note kept the target range at 0 to 1/4 percent but, effective June 17, set the interest rate paid on required and excess reserve balances (IOER, the predecessor of IORB) at 0.15% and directed ON RRP operations at an offering rate of 0.05%. In the New York Fed data, SOFR went from 0.01% on June 16, 2021 to 0.05% on June 17, and EFFR from 0.06% to 0.10%. Both rose 4 bp, so the spread held at −5 bp. With the target range unchanged, the move shows the two administered rates carrying the market on their own: SOFR landed on the new ON RRP rate, and EFFR stayed 5 bp below the new IOER rate.
The spread by year
The yearly record shows three regimes: a positive and volatile spread in 2018 and 2019, a structural discount from mid-2020 through 2023, and a return to positive, calendar-driven readings from 2024. Figures are SOFR minus EFFR in basis points on every date both rates were published.
| Year | Mean | Median | Low | High | SOFR above EFFR | SOFR above top of range |
|---|---|---|---|---|---|---|
| 2018 | +2.4 | +2 | −5 | +60 | 112 of 188 | 23 |
| 2019 | +4.2 | +1 | −5 | +295 | 149 of 250 | 18 |
| 2020 | −0.5 | 0 | −15 | +29 | 67 of 251 | 2 |
| 2021 | −4.0 | −4 | −6 | +2 | 4 of 250 | 0 |
| 2022 | −4.5 | −4 | −14 | −1 | 0 of 249 | 0 |
| 2023 | −2.0 | −2 | −3 | +7 | 11 of 249 | 0 |
| 2024 | +0.1 | −1 | −3 | +22 | 78 of 250 | 2 |
| 2025 | +3.0 | +2 | −7 | +36 | 155 of 249 | 17 |
| 2026 | +0.2 | +1 | −12 | +11 | 99 of 193 | 0 |
The 2019 mean of +4.2 bp is pulled up by a single day; the median day was only +1 bp. In 2021 and 2022 mean and median agree, the mark of a stable regime: SOFR printed above EFFR on four days in the first week of January 2021 and then not once until March 28, 2023. In 2022 SOFR was even below the bottom of the target range on 16 days, in two runs: June 13 to 24 and September 22 to 30, 2022. On June 23, 2022 it printed 1.44% against a range of 1.50% to 1.75%.
SOFR, EFFR and TGCR over the past year
In the chart, EFFR is the nearly flat line that steps when the target range moves. SOFR and TGCR move together around it. The SOFR spread tracker plots the difference itself for any date range, and the benchmarks page has the latest side-by-side readings.
When SOFR traded above EFFR
A secured rate above an unsecured one looks backward, but it recurs.
Year-end 2018 and the 2019 repo pressure
SOFR printed above the top of the target range on 23 days in 2018 and 18 in 2019, while EFFR stayed inside the range on every one of those days but September 17, 2019. The turn of 2018 into 2019 was the sharpest: SOFR was 3.00% on December 31, 2018 and 3.15% on January 2, 2019, against EFFR at 2.40% on both days, spreads of +60 and +75 bp.
September 17, 2019
SOFR printed 5.25% against EFFR at 2.30%, a spread of +295 bp. It is the only day in the data on which EFFR itself closed above the top of the target range (2.30% against 2.25%), so the stress reached unsecured funding too, but at a fraction of the size. The guide to SOFR spikes and month-end covers the episode in detail.
March 2020
On March 17, 2020, the day after the range was cut to 0% to 0.25%, SOFR printed 0.54% against EFFR at 0.25%, a spread of +29 bp. The next day the sign flipped: the record low for the spread, −15 bp, came on March 18, 2020. SOFR still traded above EFFR in runs during mid-2020, but by 2021 the discount had become the norm.
Quarter-ends of 2023 and 2024
The positive days that returned in 2023 clustered around month-, quarter- and year-ends. On December 28, 2023, SOFR first reached its all-time high of 5.40% (matched on January 2 and July 1, 2024), against EFFR at 5.33%. In 2024 the larger readings came on October 1 (5.05% against 4.83%, +22 bp) and December 26 (4.53% against 4.33%, +20 bp), and on both days SOFR was above the top of the range while EFFR was well inside it.
August 2025 to January 2026
The longest run in the data began on August 22, 2025. SOFR was above EFFR on every one of the next 93 matched business days, through January 7, 2026, with a mean spread of +8.5 bp and a median of +6 bp. Monthly means peaked at +11.9 bp in October 2025. The peak was +36 bp on October 31, 2025. SOFR printed above the top of the target range on 17 days of the run, and TGCR did so on 7, so this was not only a cleared bilateral effect: the tri-party market was paying up too. Over the same stretch, EFFR's position inside the range moved from 8 bp above the lower bound to as much as 14 bp.
Since January 2026 the spread has hovered near zero, with occasional dips, the deepest from May 14 to May 22, 2026, when SOFR ran 7 to 12 bp below EFFR, touching 3.50%, the bottom of the then 3.50% to 3.75% range, on May 20.
Where the comparison trips people upFirst, both rates are rounded to the nearest basis point, so a daily spread of +1 bp may reflect a true difference anywhere up to nearly 2 bp, and averages of a few tenths of a basis point are within rounding noise. Second, the two follow different holiday calendars: SOFR is not published on days SIFMA recommends a full close, so a handful of dates, mostly Good Fridays, have an EFFR but no SOFR. Third, a facility switched from a fed funds reference to SOFR does not inherit a fixed basis. The table above shows the annual mean ranging from −4.5 bp to +4.2 bp, and the daily spread is far wider. Model it across regimes using the floating-rate loan calculator and the rate shock calculator.
What the gap does and does not tell you
Read the sign of SOFR − EFFR as a statement about relative scarcity, not about credit. A negative spread means repo lenders have more cash than the Treasury market needs financed, and secured rates sit near the ON RRP floor. A positive spread means financing Treasuries has become relatively expensive, often at reporting dates when dealer balance sheets are tight. Neither says much about bank credit risk, because EFFR is dominated by a narrow arbitrage between FHLB lenders and banks that earn IORB.
Two refinements make the signal sharper. Comparing SOFR with TGCR separates pressure in the cleared bilateral segment from pressure across all repo. And watching where each rate sits inside the target range, on the target range history, shows whether a change in the spread came from repo moving or from fed funds moving. In the 2025 episode it was mostly the former.