SOFR

SOFR, or the Secured Overnight Financing Rate, is a benchmark interest rate used in financial markets. It reflects the cost banks pay when borrowing money overnight, secured by U.S. Treasury securities. Because it's based on actual transactions, SOFR provides a transparent and reliable measure of short-term interest rates. It helps set rates for loans, derivatives, and other financial contracts, promoting stability and consistency in the financial system. Essentially, SOFR acts as a “reference rate” that indicates the current cost of short-term borrowing in the U.S. financial markets.