The Federal Reserve Bank of New York announced last week that it will be publishing “Average SOFR” for 30, 90 and 180 days on its website starting on March 2, 2020. The confusing thing about this announcement is that the Fed has named these rates the “SOFR Averages” when the rates clearly use the ISDA Compounded SOFR methodology. The NY Fed will also publish a “SOFR Index” which will allow users to calculate Compounded SOFR for a custom period of time.
The published SOFR Averages are likely to be used by consumer cash products only. Most commercial cash products will switch from LIBOR to a 1-month or 3-month Compounded SOFR rate (assuming that Term SOFR is not available). Although it is possible to use the NY Fed’s SOFR Index to calculate 1-month or 3-month Compounded SOFR, it is likely that most market participants will use Compounded SOFR screen rates to be published by Bloomberg starting later this year instead. One last point—any of these published rates could be used for setting Compounded SOFR “in advance” or “in arrears”.