March 30, 2023 - Earlier this month the New York Fed announced that there will be no SOFR rate published on or for Friday, April 7^th even though April 7^th is a U.S. Government Securities Business Day (USGSBD). (This happens infrequently when, despite a day being a USGSBD, Treasury repo market participants broadly expect to treat it as a holiday and settlement of cleared Treasury repo is not scheduled to be available.) This announcement does not affect the publication of the Term SOFR rates administered by CME Benchmark Administration and Term SOFR rates will be published on Friday, April 7^th.  Below we look at the interpretation of this announcement under LSTA definitions of “Daily Simple SOFR” and “Daily Compounded SOFR” as set forth in the LSTA concept documents.

The “Daily Simple SOFR” definition from the LSTA’s Daily Simple SOFR Concept Document is set forth below (in relevant part) for ease of reference:

“Daily Simple SOFR” means, for any day (a “SOFR Rate Day”), a rate per annum equal to the greater of (a) SOFR for the day (such day, a “SOFR Determination Day”) that is [___] U.S. Government Securities Business Days prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website, and (b) the Floor.  If by 5:00 p.m. (New York City time) on the second (2^nd) U.S. Government Securities Business Day immediately following any SOFR Determination Day, SOFR in respect of such SOFR Determination Day has not been published on the SOFR Administrator’s Website and a Benchmark Replacement Date with respect to the Daily Simple SOFR has not occurred, then SOFR for such SOFR Determination Day will be SOFR as published in respect of the first preceding U.S. Government Securities Business Day for which such SOFR was published on the SOFR Administrator’s Website…

If the “SOFR Determination Day” is Thursday, April 6^th: The SOFR rate for April 6^th will not be published on Friday, April 7^th but instead is expected be published on Monday, April 10^th. Therefore, the SOFR publication for Thursday, April 6th would still be utilized for this SOFR Determination Day because the publication does not meet the exclusionary condition set forth in the second sentence of the definition above (assuming that on Monday, April 10th, the Federal Reserve Bank of New York publishes SOFR on its website for Thursday, April 6th).

If the “SOFR Determination Day” is Friday, April 7^th: The SOFR rate for April 7^th will not be published at all. This scenario does meet the condition set forth in the second sentence of the definition above. Therefore, the rate used for April 7^th is the value of the rate for April 6^th (which is published on Monday, April 10^th). This is because Thursday, April 6th, will be the first preceding USGSBD for which SOFR is published on the New York Fed’s Website (assuming that on Monday, April 10th, the Federal Reserve Bank of New York publishes SOFR on its website for Thursday, April 6th).

For the avoidance of doubt, if the “SOFR Rate Day” is Friday, April 7th, assuming a five USGSBD lookback, because April 7th is a USGSBD, April 7^th is such SOFR Rate Day and the rate that applies is the Friday, March 31^st SOFR rate (which is published on Monday, April 3^rd).

At the time of writing, the Good Friday 2023 statement from ISDA had not been published but is forthcoming. For questions about the impact of the New York Fed’s announcement under ISDA’s standard documentation please refer to the ISDA website.