SOFR, So Good

SOFR, So Good

Central banks raise or lower interest rates to manage a country’s overall economic health.

For example, policymakers can raise interest rates to discourage spending and promote saving, or lower interest rates to encourage borrowing and boost spending.

Most countries have their own benchmark interest rates. For example, the Hong Kong Monetary Authority (HKMA) has its Base Rate, while the US Federal Reserve (the Fed) has the Federal Funds Rate (FFR).

In the markets, financial institutions also use different benchmark interest rates to price their commercial and consumer lending products. For example, there is the Hong Kong Interbank Offered Rate (HIBOR), which is used to price housing loans and interest rate swaps, while Australia’s Bank Bill Swap Rate (BBSW) is used to price derivatives and other securities.


Why should investors bother with the switch from LIBOR to SOFR? How will this change affect you?

One main reason why you must be interested in the SOFR is because it will increasingly be used by financial institutions as a reference rate to price their investment and lending products that you buy.

And here is the second reason why investors such as you, should pay attention to the SOFR. As mentioned earlier, the SOFR has replaced LIBOR as the reference rate used by many financial institutions to price their commercial and consumer lending rates.

Bottom line
Investors who are serious about working their hard-earned money harder must pay attention to the factors that can impact their investment returns. Interest rate movements, for example, of the SOFR, is one data point that you must monitor. But it is not the only key indicator to track, to preserve and enhance your wealth. Speak to your investment adviser or relationship manager about how having knowledge of the markets can help you make informed investment decisions.

Check out our previous article
Investing in a rising interest rate environment


Stay ahead with insights

Get the latest market insights and strategies

Or contact your Relationship Manager if you are an existing client

Risk Disclosure and Important Notice

The information herein is for information only. DBS accepts no liability whatsoever for any direct, indirect or consequential losses or damages arising from or in connection with the use or reliance of this publication or its contents

Investment involves risks. The information provided is based on sources which DBS Bank Ltd. and DBS Bank (Hong Kong) Limited believe to be reliable but has not been independently verified. Any projections and opinions expressed herein are expressed solely as general market commentary and do not constitute solicitation, recommendation, investment advice, or guaranteed return. The above information does not constitute any offer or solicitation of offer to subscribe, transact or redeem any investment product. Past performances are not indicative of future performances. You should make investment decisions based on your own investment objective and experience, financial situation and particular needs. You should carefully read the product offering documentation, the account terms and conditions and the product terms and conditions for detailed product information and risk factors prior to making any investment. If you have any doubt on this material or any product offering documentation, you should seek independent professional advice.

Securities trading is an investment. The prices of stocks fluctuate, sometimes dramatically. The price of a stock may move up or down and may become valueless. It is as likely that losses will be incurred rather than profits made as a result of trading stocks. The investment decision is yours but you should not invest in any stock unless you have taken into account that the relevant stock is suitable for you having regard to your financial situation, investment experience and investment objectives.

Customers should be aware that the prices of the Callable Bull / Bear Contracts and Warrants may fall in value as rapidly as they may rise and holders may sustain a total loss of their investment. DBS Bank (Hong Kong) Limited does not provide securities advisory service. Any person considering an investment should seek independent advice on the investment suitability when considered necessary.

Bonds are investment products and some of them may involve derivatives. The investment decision is yours but you should not invest in the bonds unless DBS Bank (Hong Kong) Limited who sells them to you has explained to you that the bonds are suitable for you having regard to your financial situation, investment experience and investment objectives.

Foreign exchange involves risk. Customers should note that foreign exchange may incur loss due to the fluctuation of exchange rate.

Funds are investment products. The investment decision is yours but you should not invest in the fund unless the intermediary who sells it to you has explained to you that the fund is suitable for you having regard to your financial situation, investment experience and investment objectives.

The information provided above have not been reviewed by the Securities and Futures Commission of Hong Kong or any regulatory authority in Hong Kong.

Thank you. Your feedback will help us serve you better.

Was this information useful?

Thank you for your feedback
Let us know how this article helped:
We're sorry to hear that.
How can we do better?
Please enter only letters, numbers, @!$&-()',./