Drift Toward Credit-Based Libor Alternative Possible, BofA Says

The recent issuance of debt tied to the BSBY index and “mixed messaging” on term SOFR rates increase the possibility that market participants “gravitate toward a forward-looking, credit sensitive” benchmark to replace Libor, Bank of America strategist Mark Cabana says in note.

• “Market participants have long expressed their desire to have a forward-looking, credit-sensitive index and this week marks a meaningful step in this direction”
• Lack of direction on long-term indexes tied to the Secured Overnight Financing Rate may encourage participants to move in the direction of the Bloomberg Short Term Bank Yield Index, especially if there’s additional debt issuance ...