Memo #
32583

LIBOR Update: ICI Submits Comment Letter on Treasury Request for Comment on SOFR-Indexed Floating Rate Notes
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[32583]

July 6, 2020 TO: ICI Members
Accounting/Treasurers Committee
LIBOR Transition Working Group
SEC Rules Committee
Security Valuation Operations Committee SUBJECTS: Compliance
Fund Accounting & Financial Reporting
Valuation RE: LIBOR Update: ICI Submits Comment Letter on Treasury Request for Comment on SOFR-Indexed Floating Rate Notes

 

On May 22, the US Treasury Department published a request for comment regarding the potential issuance of SOFR-indexed floating rate notes.[1] The request for comment included questions about the operational readiness of likely investors to purchase such floating rate notes. 

ICI submitted a comment letter to the Treasury Department explaining that regulated funds, as potential investors in SOFR-indexed floating rate notes, are taking steps to transition from LIBOR to alternative rates, such as SOFR. Our comment letter supports the Treasury Department issuing SOFR-indexed floating rate notes as we believe that doing so would have the potential to advance the pace of LIBOR transition throughout the market. 

We recognize that, if it were to issue floating rate notes, the Treasury Department would have a leadership role in standardizing SOFR rate conventions for those products. Setting standard rate conventions would assist funds, vendors, and the market as a whole in LIBOR transition. We note that the Treasury Department would not be setting rate conventions in a vacuum, however, and recommend that it keep in mind the SOFR rate conventions already being used by issuers and Alternative Reference Rate Committee (ARRC) recommendations.

ICI’s comment letter is attached.

 

Bridget Farrell
Assistant General Counsel

 

Attachment

endnotes

[1] See Development and Potential Issuance of Treasury Floating Rate Notes Indexed to the Secured Overnight Financing Rate, 85 Fed. Reg. 31,282 (May 22, 2020), available at https://www.treasurydirect.gov/instit/statreg/auctreg/Treasury_RFI_SOFR_FRN3.pdf; see also ICI Memorandum No 32485, available at https://www.ici.org/my_ici/memorandum/memo32485.