SOFR, the Secured Overnight Financing Rate, is the interest rate on overnight loans of cash backed by US Treasury securities. Those loans are repurchase agreements, or repos: a borrower sells Treasuries for cash and agrees to buy them back the next day at a slightly higher price, and the difference is the interest. The New York Fed gathers each business day's eligible trades, finds the rate paid at the midpoint of dollar volume and publishes it the following morning. For October 29, 2026, SOFR was 3.94% on $3,145 billion of trades. It is now the main benchmark for dollar floating-rate loans, notes and swaps, the job USD LIBOR used to do. The securities pledged as collateral are covered on the US Treasuries hub.
How does the New York Fed calculate SOFR?
It sorts the previous business day's eligible overnight Treasury repo trades from lowest to highest rate and reports the rate at the midpoint of dollar volume.
That midpoint is a volume-weighted median, rounded to the nearest basis point. The trades come from three corners of the repo market, which the New York Fed stacks in layers and publishes as three separate rates:
| Rate | Trades included | Volume, Oct 29, 2026 | Rate, Oct 29, 2026 |
|---|---|---|---|
| Tri-Party General Collateral Rate (TGCR) | Tri-party repos in which the collateral is assigned after the terms are agreed, from data supplied by BNY and the Office of Financial Research; trades with the Fed are left out | $1,212 billion | 3.92% |
| Broad General Collateral Rate (BGCR) | TGCR trades plus general collateral repos in the GCF service of the Fixed Income Clearing Corporation (FICC) | $1,242 billion | 3.92% |
| SOFR | BGCR trades plus repos for specific securities cleared through FICC's delivery-versus-payment (DVP) service, minus the lowest-rate 20% of that DVP volume | $3,145 billion | 3.94% |
The trim exists because each DVP trade names the exact security pledged. When one issue is in heavy demand, cash lenders accept an unusually low rate to get hold of it, and the market says that issue is trading special; without the cut, those cheap trades would pull SOFR down. The New York Fed also drops trades between affiliated firms, trades agreed for forward settlement and any that do not look like arm's-length deals. Alongside the median it publishes the 1st, 25th, 75th and 99th percentiles, which for October 29 were 3.89%, 3.92%, 3.99% and 4.02%.
Worked example: Finding a volume-weighted median from five rates
Suppose one day's eligible trades collapse into five rates. The figures are illustrative but add up to the real October 29 volume:
| Rate | Volume | Running total |
|---|---|---|
| 3.88% | $400 billion | $400 billion |
| 3.92% | $700 billion | $1,100 billion |
| 3.94% | $900 billion | $2,000 billion |
| 3.99% | $800 billion | $2,800 billion |
| 4.02% | $345 billion | $3,145 billion |
Half of $3,145 billion is $1,572.5 billion. The running total first passes that mark in the 3.94% row, so SOFR would be 3.94%. A volume-weighted mean of the same trades comes to 3.95%.
Now add $30 billion borrowed at 9.00%, about 1% of the total. The midpoint shifts to $1,587.5 billion, still inside the 3.94% row, so SOFR does not move, while the mean jumps to 4.00%. A median shrugs off a small, stressed corner of the market.
What are SOFR Averages and the SOFR Index?
They are compounded versions of SOFR, published each business day, that let a lender charge one rate for a whole interest period instead of tracking every overnight print.
Each business day's SOFR earns simple interest until the next business day, so a Friday rate covers three calendar days, and days are counted against a 360-day year, the usual dollar money market convention. The New York Fed publishes 30-, 90- and 180-day averages plus the SOFR Index, which shows how a unit invested at 1.00000000 on April 2, 2018, the first date SOFR covers, has grown with daily compounding. The first official index value came out on March 2, 2020. Any two index readings give the compounded rate between their dates:
| Published October 30, 2026 | Value |
|---|---|
| 30-day Average SOFR | 3.89857% |
| 90-day Average SOFR | 3.77532% |
| 180-day Average SOFR | 3.71759% |
| SOFR Index | 1.26495310 |
The longer averages sit lower because they reach back before the Fed raised its target range by a quarter point on September 16, 2026; the 30-day window starts on September 30, after the increase.
Worked example: Interest on a $1.2 million loan at SOFR plus 2.00%, September 30 to October 30, 2026
A business borrows $1,200,000 at compounded SOFR plus a 2.00% margin. Interest is due for the 30 days from Wednesday, September 30, to Friday, October 30, 2026.
- SOFR Index on September 30: 1.26085682
- SOFR Index on October 30: 1.26495310
- Growth over the period: 1.26495310 ÷ 1.26085682 − 1 = 0.00324881
- Compounded SOFR, annualized: 0.00324881 × 360 ÷ 30 = 3.89857%, matching the 30-day average published October 30
- SOFR interest: $1,200,000 × 0.00324881 = $3,898.57
- Margin interest: $1,200,000 × 2.00% × 30 ÷ 360 = $2,000.00
- Interest due: $5,898.57, an all-in rate of 5.89857%
Applying the 3.94% printed for October 29 to the whole month would have produced $5,940.00 instead, $41.43 more, because SOFR was lower earlier in the period.
Many agreements shift the observation window back a few business days so the borrower knows the bill before it is due; the arithmetic does not change.
Why did SOFR replace USD LIBOR?
LIBOR rested on banks' estimates of what unsecured borrowing would cost them, while SOFR is computed from trades that actually took place.
The Alternative Reference Rates Committee, formed in 2014 to find a successor, says LIBOR's lack of an anchor in real market activity left it open to manipulation. The committee unanimously picked SOFR in 2017, and the New York Fed published the first rate, 1.80%, for April 2, 2018. US banking regulators told supervised firms to stop writing new USD LIBOR contracts by the end of 2021, and the remaining panel settings ended after June 30, 2023. LIBOR had been referenced in an estimated $400 trillion of financial contracts, according to the UK Financial Conduct Authority.
Old contracts with no workable fallback were moved over by law. Under the Adjustable Interest Rate (LIBOR) Act and the Federal Reserve Board's Regulation ZZ, adopted December 16, 2022, those contracts switched after June 30, 2023 to a SOFR-based rate plus a fixed spread for each tenor. The spread stands in for the premium LIBOR carried for lending to banks without collateral, which SOFR lacks.
| LIBOR setting replaced | Spread added to the SOFR-based rate |
|---|---|
| Overnight | 0.00644 point |
| 1-month | 0.11448 point |
| 3-month | 0.26161 point |
| 6-month | 0.42826 point |
| 12-month | 0.71513 point |
Which SOFR-based rate applies depends on the contract. Derivatives take the fallback rate in the ISDA protocol, most business loans and bonds take CME Term SOFR for the matching tenor, and consumer loans also moved to Term SOFR, with the spread phased in over the first year.
Where do you meet SOFR?
Mostly in floating-rate borrowing and lending: business loans, adjustable-rate mortgages, agency floating-rate notes and the derivatives that hedge them.
- Business loans. Lenders quote compounded SOFR, as in the loan example above, or Term SOFR, a forward-looking rate fixed at the start of each interest period.
- Adjustable-rate mortgages. Fannie Mae requires its ARM plans to use the 30-day Average SOFR, read 45 days before each change date, as the example below shows.
- Floating-rate notes. Fannie Mae sold the first SOFR-linked securities on July 26, 2018: $6 billion of 6-, 12- and 18-month notes paying SOFR plus 0.08, 0.12 and 0.16 point.
- Not Treasury FRNs. Treasury floating rate notes reset each week to the 13-week bill auction, not to SOFR.
Worked example: A SOFR mortgage reset on December 1, 2026
A Fannie Mae SOFR ARM with a 2.75% margin reaches an interest change date on Tuesday, December 1, 2026.
- Index date: 45 days earlier is Saturday, October 17, so the latest available index is the 30-day Average SOFR published Friday, October 16: 3.87449%
- Index plus margin: 3.87449 + 2.75 = 6.62449%
- Rounded to the nearest one-eighth of a point: 6.625%
- First month's interest on a $300,000 balance: $300,000 × 6.625% ÷ 12 = $1,656.25
Caps written into the note can hold the new rate lower, and Fannie Mae limits ARM margins to 3 percentage points.
How is SOFR different from the fed funds rate, LIBOR and Term SOFR?
Each measures a different market: SOFR covers secured overnight borrowing, the fed funds rate unsecured bank borrowing, LIBOR was a survey, and Term SOFR looks forward.
| Rate | What it measures | Who publishes it | Latest reading |
|---|---|---|---|
| SOFR | Overnight repo backed by Treasuries, about $3 trillion a day | New York Fed, about 8:00 a.m. ET | 3.94% on $3,145 billion, Oct 29, 2026 |
| Effective federal funds rate | Overnight unsecured borrowing by banks, mostly from government-sponsored enterprises | New York Fed, about 9:00 a.m. ET | 3.88% on $117 billion, Oct 29, 2026 |
| Term SOFR | 1-, 3-, 6- and 12-month rates implied by SOFR derivatives | CME Group | Set at the start of each period |
| USD LIBOR | Panel banks' estimates of unsecured borrowing costs | ICE Benchmark Administration | Last panel settings June 30, 2023 |
| Treasury FRN index | 13-week bill auction rate | US Treasury | 4.050% discount rate, Oct 26, 2026 auction |
Secured does not always mean cheaper. On October 29, 2026, SOFR stood 0.06 point above the effective fed funds rate, since the two markets have different lenders and borrowers. The federal funds rate entry explains the Fed's target range, and how Fed rate decisions affect T-bill rates traces how both overnight rates feed into bill yields. The FCA counts SOFR among the overnight risk-free rates that replaced LIBOR, alongside SONIA for sterling; what is the risk-free rate explains how investors use that label differently. Savers do not earn SOFR directly, and the nearest retail product is a government money market fund, which can hold repos alongside Treasury bills.
What do people get wrong about SOFR?
Most mistakes come from treating SOFR as one number, when a contract may use a daily print, a compounded average or a forward-looking term rate.
- Assuming Treasury FRNs pay SOFR. They follow the 13-week bill, and the October 26, 2026 auction set their index at about 4.09%, roughly 0.15 point above SOFR. Bill yields by maturity are on T-bill rates today.
- Using the daily rate when the contract says average. On October 30, 2026 the latest daily SOFR was 3.94% but the 30-day average was 3.89857%. Check which one the note or loan agreement names, and how far back it looks.
- Forgetting the spread on converted LIBOR loans. A legacy business loan at 3-month LIBOR plus 2.00 points that fell under the LIBOR Act now pays 3-month CME Term SOFR plus 2.26161 points, the old margin plus the 0.26161 adjustment.
- Expecting a smooth rate. SOFR comes from trading, not a Fed setting. It sat at 0.01% on 89 days between March 2020 and June 2021, and its 5.40% high came on December 28, 2023, January 2, 2024 and July 1, 2024, each at the turn of a year or quarter.
- Confusing SOFR with the prime rate. Credit cards and home equity lines usually follow the prime rate, which banks set off the fed funds target.
Longer Treasury yields also carry a term premium on top of the overnight rates investors expect SOFR and fed funds to follow.