SOFR Academy Announces Its Intention to Publish the Across-the-Curve Credit Spread Index (AXI), to Assist the Market With U.S. Dollar LIBOR Transition

NEW YORK--(BUSINESS WIRE)--SOFR Academy LLC, a leading education technology firm and market data provider, announced that it has reached an exclusive global agreement to calculate and publish the Across-the-Curve Credit Spread Index known as AXI. Developed by a group of leading academics, AXI is an interest rate index designed to serve as a potential credit-sensitive spread added to the Secured Overnight Financing Rate (SOFR) to support the transition of loan products away from the London Interbank Offered Rate (LIBOR).

This agreement to publish AXI will provide an important option for market participants. Marcus Burnett, Director of SOFR Academy, said, “Banks do not fund themselves in the short-term money markets in the same way that they used to; they now fund themselves further out the curve. That is the core reason that LIBOR is fundamentally flawed.” The U.S. Official Sector have said that the same issues associated with LIBOR must not be replicated in the development of a credit sensitive spread. “The IOSCO Principles state that the design of a benchmark should seek to achieve, and result in an accurate and reliable representation of the economic realities of the interest it seeks to measure. That is why we believe AXI could be a strong choice for market participants. We are delighted to publish AXI,” Burnett added.

Co-creator of AXI, Professor of Finance Antje Berndt commented, “Our research showed that the composition of banks’ unsecured issuance volumes across maturities change substantially over time. Therefore, a credit spread that reflects actual marginal funding costs should also switch its emphasis by tenor. We hope that AXI will be a useful approach for market participants.”

About the Across-the-Curve Credit Spread Index (AXI)

Created jointly by Professor Darrell Duffie of Stanford University and Professors Antje Berndt and Yichao Zhu of Australian National University, the index is a measure of the recent cost of wholesale unsecured debt funding for publicly listed U.S. bank holding companies and their commercial banking subsidiaries. The index is a weighted average of credit spreads for unsecured debt instruments with maturities ranging from overnight to five years, with weights that reflect both transactions volumes and issuance volumes. AXI was one of the indexes discussed during the Federal Reserve Bank of New York hosted Credit Sensitivity Workshops, which explored ways to support the transition of loan products away from LIBOR.

About SOFR Academy

SOFR Academy is a U.S. based education technology firm and market data provider. SOFR Academy’s panel of advisors include academics from Harvard University and the MIT Sloan School of Management as well as experienced financial services professionals. SOFR Academy’s mission is to empower people, organizations and communities with the knowledge and skills to succeed in a financial ecosystem that does not rely on Interbank Offered Rates. SOFR Academy is an Amazon Web Services partner.

About the Secured Overnight Financing Rate

SOFR is published by the Federal Reserve Bank of New York and is used subject to The New York Fed Terms of Use. The New York Fed has no liability for your use of the data. AXI is not associated with, endorsed or sponsored by The New York Fed.

To register your interest in AXI please visit:
www.SOFR.org/AXI