What Is SOFR and Why Does It Matter for Bond Proceeds?

SOFR, the Secured Overnight Financing Rate, is the Federal Reserve Bank of New York's broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.

It matters for bond proceeds because U.S. dollar LIBOR panels ended after June 30, 2023, and the replacement rates the Federal Reserve Board selected under the LIBOR Act are built from SOFR.

This page explains what the rate measures and how it is built, how it reaches bond-proceeds investment agreements and swaps, how it differs from the SLGS rate, and where each print can be followed.

For the levels themselves, mGIC's today's reinvestment rates page gathers the Treasury curve, SOFR and the SLGS rate table links in one place.

What is SOFR?

SOFR is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, the definition the New York Fed uses when it administers and publishes the rate.

The rate is calculated as a volume-weighted median of overnight Treasury repo transactions, so it reports where the overnight Treasury collateral market actually traded.

Its inputs are tri-party repo data from BNY and the Office of Financial Research, General Collateral Finance (GCF) repo data, and bilateral Treasury repo data cleared through FICC's delivery-versus-payment (DVP) service.

Coverage follows the same design: SOFR takes in all Broad General Collateral Rate trades plus that bilateral FICC DVP repo, filtered to remove some "specials".

The New York Fed publishes SOFR each business day at approximately 8:00 a.m., Eastern time.

The rate's first value date was April 2, 2018, and the New York Fed's compounding table shows the first published print one day later, on April 3, 2018, at 1.80%.

Alongside the daily rate, the New York Fed publishes SOFR Averages and a SOFR Index shortly after each print.

The index compounds SOFR each business day from a base value of 1.00000000 on April 2, 2018, and its first official published value, dated March 2, 2020, reflected compounding from that base through March 2, 2020.

That construction matters for bond proceeds because an overnight print becomes term economics through compounding or averaging, which is the work the Averages and the index do.

What is a SOFR-indexed investment agreement?

A SOFR-indexed investment agreement credits a rate built from published SOFR, for example the daily print or a compounded average of it, rather than a rate fixed for the whole term.

The LIBOR transition explains why issuers encounter these terms: the Federal Reserve describes LIBOR as the dominant benchmark rate used in financial contracts for decades, one that was fragile and subject to manipulation, and U.S. dollar LIBOR panels ended after June 30, 2023.

For contracts subject to the LIBOR Act that lacked workable fallbacks, the Board adopted a final rule, Regulation ZZ, on December 16, 2022, selecting SOFR-based replacement rates for overnight, 1-, 3-, 6- and 12-month LIBOR settings.

How any particular agreement moved off LIBOR depends on its own fallback language: contracts subject to the Act without a workable fallback received the Board's replacement rates.

When an agreement compounds SOFR across an observation period, the published index carries the accumulation, and the ratio of the index on the period's end date to its value on the start date gives the compounding factor.

Fixed-rate structures price from the other direction: their rate is negotiated for the term rather than reset from a daily print, and how GIC rates are set walks through what enters that negotiation.

Which side of that split a fund emphasizes in a rising or falling rate path is the strategy question mGIC's rate-environment strategy guide addresses.

What happens to swaps and floating-rate debt that referenced LIBOR?

Swaps and floating-rate debt that referenced U.S. dollar LIBOR needed new terms once the panels ended after June 30, 2023, and the route each contract took depends on its fallback language.

Contracts subject to the LIBOR Act without workable fallbacks received the Board's SOFR-based replacement rates under Regulation ZZ.

The tax side matters for bond proceeds when a swap is a qualified hedge integrated with tax-advantaged bonds under Treasury Regulation §1.148-4(h)(1).

There, Treasury's LIBOR-transition regulation speaks directly: under 26 CFR 1.1001-6(c)(1)(iv), adopted in T.D. 9961 (87 FR 176, January 4, 2022), a covered modification of a qualified hedge, or of the tax-advantaged bonds with which the qualified hedge is integrated under §1.148-4(h)(1), is treated as not terminating the qualified hedge, as long as the modified hedge still qualifies within the regulation's 90-day window.

Whether a particular amendment meets the rule's conditions is a technical tax conclusion for bond counsel and tax counsel rather than something the benchmark choice settles.

Issuers revisiting a legacy agreement or hedge years into the transition can use mGIC's review of an existing investment to line up the documents that bear on the position.

How does SOFR differ from the SLGS rate?

SOFR and the SLGS rate are both published each business day, but they are different kinds of numbers: SOFR is a market rate built from repo transactions, and the SLGS rate is an administered figure Treasury defines by rule.

Under 31 CFR 344.1, the SLGS rate is the current Treasury borrowing rate less one basis point, and when that result would be negative the rate is set at zero.

Treasury determines the "current Treasury borrowing rate" itself and may use proxies for maturities Treasury does not issue, so the SLGS rate is a rule-defined rate rather than a published market yield.

The zero floor was added by Treasury's 2012 final rule, which noted that market conditions could otherwise have produced negative SLGS rates.

Treasury's 2024 final rule on the program states that the maximum SLGS rates have been set at the current Treasury borrowing rate less one basis point since 2005.

Publication runs on a different clock as well: under 31 CFR 344.4(b), Treasury releases the SLGS rate table each business day by 10 a.m., Eastern time.

For a step-by-step walkthrough of the table itself, see how to read the daily SLGS rate table, and for where the securities fit in a financing, see the SLGS guide.

Where can issuers follow SOFR and the SLGS rate each day?

Each administrator publishes on its own schedule: the New York Fed posts SOFR at about 8:00 a.m., Eastern time, while Treasury releases the SLGS rate table by 10 a.m., and mGIC's today's reinvestment rates page gathers the sources in one place.

mGIC also sends daily rate updates each business day with Treasury yields and links to SOFR and the SLGS tables.

For a specific fund, mGIC provides a free, no-obligation reinvestment review that can read an existing agreement's benchmark terms against the fund's permitted investments and draw schedule.

Short definitions of SOFR and other reinvestment terms are collected in mGIC's glossary.

Final determinations about an issue's documents, investments and tax treatment belong to bond counsel and tax counsel.

Last updated 2026-10-06.

This page is general educational information about municipal finance and federal and state rules as of the date shown. It is not legal, tax or investment advice, and it is not a recommendation about any particular investment. Product availability, legality and suitability depend on the issuer, jurisdiction, governing documents and transaction-specific facts. Final legal and tax determinations remain with the issuer's bond counsel, tax counsel and other advisors.