July 30, 2021
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The US Alternative Reference Rates Committee has officially recommended the CME Group's forward-looking Secured Overnight Financing Rate term rate to replace the London Interbank Offered Rate as a benchmark. "Market participants now have all the tools they need as we enter the transition's homestretch," said Tom Wipf, the committee's chairman.
Full Story: Reuters (7/29),  Bloomberg (7/29),  Financial Times (subscription required) (7/29),  Practice Insight (7/29) 
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The cross-currency swap market plans to switch from Libor to risk-free rates for US dollar, sterling, Swiss franc and Japanese yen on September 21 in what is being called the "RFR first" initiative. Market experts say the move may spur a switch for euro/dollar trading to RFR by the end of the year.
Full Story: Risk (subscription required) (7/30) 
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Industry News and Trends
The European Central Bank and the Bank of England are publicly warning about banks' exposure to leveraged loans and high-yield bonds, but investors haven't lost their appetite for potentially risky deals. Loan prices are back to pre-pandemic levels and junk bond yields have fallen, and a new wave of deals is on the way.
Full Story: Bloomberg (7/29) 
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US GDP rose at a 6.5% annual rate in the second quarter, falling below the expectations of economists surveyed by The Wall Street Journal, which had predicted an 8.4% annual pace. However, the growth represented a milestone, as it sent GDP above pre-pandemic levels.
Full Story: The Wall Street Journal (7/29) 
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Turkey's lira is starting to recover from the sharp decline it suffered early this year and bond buyers are beginning to develop an appetite for lira-denominated debt after the central bank resisted pressure from president Recep Tayyip Erdogan to lower interest rates. This month the currency has gained around 3% against the US dollar.
Full Story: Financial Times (subscription required) (7/30) 
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The US is widely expected to avoid possible defaults by raising the debt ceiling or resuming its suspension, but analysts say this could lead to a shortage of safe short-term securities with consequent pressure on money market rates and funds.
Full Story: Reuters (7/29),  Financial Times (subscription required) (7/29) 
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Regulatory Roundup
The House Financial Services Committee has advanced a bill sponsored by Rep. Brad Sherman, D-Calif., that would allow the Federal Reserve to ease the adoption of contracts to the Secured Overnight Financing Rate. The proposed Adjustable Interest Rate (LIBOR) Act of 2021 would set a legal process for automatically switching legacy financial contracts from Libor to SOFR.
Full Story: American Banker (7/29) 
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Congressman Don Beyer, D-Va, has introduced the "Digital Asset Market Structure and Investor Protection Act" which proposes to compel the US Securities and Exchange Commission and the US Commodity Futures Trading Commission to jointly clarify the regulatory status of the digital asset market. The bill also empowers the Federal Reserve to issue a digital dollar and would require the Secretary of the Treasury to approve any fiat-backed stablecoin prior to issuance.
Full Story: CoinDesk (UK) (7/29),  The Block (7/29) 
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A bipartisan Senate proposal to mandate reporting of cryptoasset transactions above $10,000 to the IRS, which would result in taxes on some trades, has caused concern among cryptocurrency exchanges, their investors and advisers. Critics say the proposal has been drafted too hastily, while advocates say it would simply level the playing field between traditional assets and digital assets.
Full Story: MarketWatch (tiered subscription model) (7/29),  Bloomberg (7/29) 
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ISDA News and Events
*Complimentary Registration* Benchmark Strategies Forum: Part III, sponsored by CME Group - September 15
The countdown is on with just over 3 months to go until most LIBOR settings cease or become non-representative. Join us for Part III of ISDA's Benchmark Strategies Forum to gain insight on the progress towards the use of alternative rates & the final hurdles that need to be negotiated. Click here to secure your complimentary registration!
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Upcoming conferences on the New 2021 ISDA Interest Rate Definitions - August & September 2021
Learn first-hand from ISDA on everything you need to know about the New 2021 ISDA Interest Rate Derivatives Definitions. Broadcast live within various time zones to educate market participants in multiple jurisdictions, these virtual events will provide an overview of the structure & expected changes of the new definitional publication ahead of the implementation date scheduled for October 4, 2021. Register today here!
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ISDA and Brattle Launch IBOR Benchmark Fallbacks Microsite
ISDA launched its Understanding IBOR Benchmark Fallbacks microsite on its newly redesigned Benchmark Reform and Transition from LIBOR InfoHub. The microsite was developed in coordination with The Brattle Group and provides background information about key interbank offered rate fallbacks.
Full Story: International Swaps and Derivatives Association/The Brattle Group (7/22) 
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