Secured Overnight Financing Rate (SOFR)

The Secured Overnight Financing Rate (SOFR) is a benchmark interest rate that reflects the cost banks pay to borrow cash overnight, secured by U.S. Treasury securities. It is used as a reference for setting interest rates on various financial products, such as loans and derivatives. Because it is based on actual transactions in the repurchase agreement (repo) market, SOFR offers a transparent and reliable measure of overnight borrowing costs, helping ensure stability and consistency in financial markets.