As I was saying in my last commentary, it’s time to stay calm and carry on in a market that is flashing green, red and yellow signals simultaneously. These are market conditions in which nimbleness will be rewarded. Whether the economy is going to continue to grow, albeit in a very low gear, or whether … Continue Reading
I’ve been back from CREFC’s and RER’s annual meetings for a week or so, mulling what those confabs meant. There’s been plenty of reportage on the events, the panels, the parties, the to-ing and fro-ing, but what I want to do is step back and reflect on the gestalt; the subtext, the hidden codex. What … Continue Reading
Why I’m bothering to write about SOFR transition at this point is a bit of a mystery. Hasn’t this topic now finally exhausted both our energy and interest? Oh, and a European war is being fought as I write which, to say the least, renders the kerfuffle over LIBOR somewhat less than consequential. But irrelevancy … Continue Reading
The Great Index Reformation is coming. (I note in passing that the last Reformation led to the 100 Years War…just saying.) This is a massive change to our market that did not bubble up from the great unwashed on the barricades demanding change, but something that has been driven from the regulatory heights. More a … Continue Reading
It’s a rule around here that I don’t write on the same topic twice in a row because if you don’t get bored, I will. I am making an exception this week to revisit last week’s blog about the industry’s failure to take on, or at least discuss, the considerable negative externalities of transferring our … Continue Reading
To my gentler readers, first an apology for this interregnum in publication. I’ve been sitting on this commentary like a hen on an egg for weeks. All I can say is having to work for a living gets in the way of writing about interesting stuff. It’s now July and supposedly the transition from LIBOR … Continue Reading
God knows I’m as sick of LIBOR transition as you are and writing about it twice in quick succession is annoying, but I think necessary. Here’s the headline which I don’t think has gotten the visibility it deserves: LIBOR will largely end at the end of this year and not in the misty remove of … Continue Reading
We’ve written before about our anxiety regarding the fact that SOFR does not really seem fit for purpose to support commercial mortgage lending or indeed any cash product. (The nonsense about charging interest in arrears should have been a tell, to be honest.) Of course, the real problem is the absence of a credit-sensitive component … Continue Reading
First, the ARRC, playing Charlton Heston, playing Moses, brings down from on high the ten commandments of SOFR and lo, we were sore afraid and with veneration, professed we had no God but SOFR. A solution of sorts to a somewhat self-inflicted problem. As we have observed before, we continue to think the solution to … Continue Reading
My, my, my! Another governmental red line looks to be breached; at least this time no one gets hurt. We, at CrunchedCredit, have in some sense been carrying the government’s water about LIBOR transitions. We have been talking about how to prepare for transition, how to move current loan production onto a sound non-LIBOR basis … Continue Reading
Timing is everything. I published a piece two weeks ago on LIBOR transition to SOFR and suggested that folks get on with it and embrace this flawed but seemingly inevitable new SOFR index. Writing that piece, I thought of as rather an exercise in self-care, I just had to get beyond my annoyance with SOFR … Continue Reading
I wrote back in the early days of 2020, or as we call it now, the “Time Before,” that we thought it made sense for key market participants to consider an early move to SOFR pricing, not just as the backstop but as the interest rate of the loans. Frankly, we were thinking about the … Continue Reading
Regulators have been increasing their scrutiny of LIBOR transition efforts as they ramp up messaging stressing that the time to act is now. The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) issued a National Exam Program Risk Alert to introduce a LIBOR Examination Initiative on the upcoming discontinuation of, and transition … Continue Reading
COVID-19 has driven anxiety over the LIBOR transition right off almost everyone’s top-of-mind list and yet the crisis is taking no notice of that lack of regard and soldiering on. The ARRC continues to beaver away, generating guidance and advice and otherwise proselytizing the need to get on with it and be ready for transition … Continue Reading
The LIBOR transition plods onward. Last Wednesday, the Alternative Reference Rates Committee (ARRC) announced its recommended spread adjustment methodology for cash products referencing LIBOR. Regulators around the world have been clear: interim LIBOR replacement deadlines might slip, but LIBOR’s days are still numbered. At the end of March, which feels like ten thousand years ago, … Continue Reading
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 … Continue Reading
The ARRC Consultation on Spread Adjustment Methodologies for Fallbacks in Cash Products Referencing USD LIBOR is finally here. How the spread adjustment from LIBOR to a SOFR index will be calculated is one of the more consequential open items on the ARRC’s to-do list.… Continue Reading
One of the good things about the 24/7 news cycle, perhaps one of its few positive externalities, is that it’s a boon for the pontification business. It enables all sorts of otherwise serious people to make fools of themselves day in and day out predicting generally gloomy stuff, as sunshine doesn’t sell. As a card-carrying … Continue Reading
As is our tradition here at Crunched Credit, each year, about this time, we award our Golden Turkey Awards. Once again, I must say that we are utterly blessed with so many worthy candidates. The truly deserving have once again wrangled with vision and astounding persistence to earn a spot on our acclaimed list. To … Continue Reading
Last week, the U.S. Department of the Treasury released proposed rules providing tax guidance around various LIBOR replacement issues. Long anticipated. The defenestration of LIBOR will leave considerable broken glass in its wake. Perhaps just so the tax professionals wouldn’t feel left out, the end of LIBOR will create a series of tax problems. Very … Continue Reading
The LIBOR transition process is an affair of headache-inducing complexity. Amidst the thousands of gallons of ink spilled on the subject, we thought it might be useful, from time to time, to give you some important information in bite-sized servings (don’t worry, we will continue to publish lengthy, irreverent commentaries on the subject that our … Continue Reading
The US economy is about to pay the butcher’s bill for a massive disruption of worldwide financial markets resulting from the elimination of the London Interbank Offered Rate, or LIBOR. And, we are doing this on purpose. It seems the denizens of the heights of our international financial fabric felt they had to do this … Continue Reading
We are all going to be heartedly sick of discussing LIBOR and LIBOR transition long before it becomes a thing at the end of 2021, but we really need to get this done. I can’t make this at all funny. We have a problem…but not a solution. Fixing it is going to be a heavy … Continue Reading
