SOFR history: 2020

SOFR's 2020 splits into two regimes separated by 12 days in March. The 42 observations before March 4 averaged 1.568%, inside a 1.50%–1.75% target range, and the year's high of 1.64% came on March 3. The range then dropped to 1.00%–1.25% in the EFFR data from March 4, when SOFR fell 41 bp to 1.23%, and to 0.00%–0.25% from March 16, when it fell 84 bp to 0.26%. That is the third-largest daily move in the series, after the two September 2019 swings covered on the 2019 page. The adjustment was not smooth: SOFR rose 28 bp to 0.54% on March 17, above the new ceiling, before dropping 44 bp to 0.10% on March 18 on $1,358 billion, the year's highest volume.

SOFR reached its low on March 24 with a 0.01% print, still the all-time low. SOFR printed 0.01% on 19 days in 2020, the last of them May 20. At the end of March the bottom of the trade distribution went below zero: the 1st-percentile rate was −0.01% on March 27, −0.02% on March 30, −0.03% on March 31 and −0.01% on April 1, while the median held at 0.01%. From March 19 to year-end the 198 observations averaged 0.073%, and the second half never left a 0.05%–0.13% band. The month-end premium disappeared: no month-end from March onward printed more than 2.4 bp above its prior five days, and December 31 came in at 0.07%, 1.4 bp below. SOFR also sat below EFFR on 101 days and above it on 67, the reverse of 2018 and 2019.

The New York Fed began publishing the 30-, 90- and 180-day SOFR Averages and the SOFR Index on March 2, 2020, two days before the first lower range appeared in the EFFR data. The first Index value was 1.04085026, compounding SOFR from its April 2, 2018 base. The averages show how slowly a backward-looking rate absorbs a shock: the 30-day average fell from 1.58731% on March 2 to 0.65016% on March 31, and the 180-day average was still 0.64646% on June 30, when daily SOFR was 0.10%. It reached 0.08874% by December 31. The averages and index page and the SOFR Index calculator work from this series.

The transition calendar filled in around the low rate. On June 30 the ARRC said its spread adjustments for non-consumer cash products would match ISDA's. CME and LCH switched discounting and price alignment from EFFR to SOFR on October 16. ISDA launched its IBOR Fallbacks Supplement and Protocol on October 23, effective January 25, 2021. On November 30 the Federal Reserve Board, FDIC and OCC encouraged banks to stop entering new USD LIBOR contracts by December 31, 2021. Average daily volume eased each quarter: $1,148.4 billion in the first, $1,103.5 billion in the second, $952.7 billion in the third and $930.3 billion in the fourth. SOFR stayed pinned near zero through 2021.

How long the averages took to catch up

Daily SOFR was at 0.26% by March 16, but each average needed its full window to absorb the cuts. The 30-day average fell below 0.10% on April 14. The 90-day average was still 0.25496% on May 29 and first went below 0.10% on June 10, at 0.09234%. The 180-day average took until September 8 (0.09246%). On June 30, a loan priced off the 180-day average was still accruing more than six times the 0.10% overnight rate. A loan priced in arrears, compounding the daily rate over its own interest period, picked up the cuts straight away.

Worked example: the SOFR Index over 2020

The Index makes a compounded rate a two-number calculation. Take $10,000,000 from March 2, 2020, the first published Index date, to December 31, 2020, which is 304 calendar days. Under the New York Fed's custom-period formula, this uses SOFR for value dates March 2 through December 30.

The 0.127% rate sits far above the 0.073% average of daily prints from March 19 onward, because the period includes the first two weeks of March, before the cuts reached SOFR. The SOFR Index calculator repeats this for any pair of published dates.

Reading the negative percentiles

The daily table's 1st–99th percentile column turns negative on four rows: March 27, March 30, March 31 and April 1. A 1st-percentile rate of −0.03% on March 31 means at least 1% of that day's dollar volume traded at or below −0.03%, with the lender of cash paying to place it. The median that day was 0.01%, and the 99th percentile was 0.17%, so the negative trades sat in a thin tail. SOFR itself never printed below zero. The widest band of the year came on March 16, when the 99th percentile was 2.00% against a 0.26% median, 180 bp apart.

SOFR and the target range in 2020

2020 summary statistics

SOFR by month, 2020

Every 2020 observation