The Secured Overnight Financing Rate (SOFR) is the broad benchmark interest rate for dollar-denominated derivatives, commercial loans, and adjustable-rate mortgages (ARMs).
Developed by the Alternative Reference Rates Committee (ARRC) and published daily by the Federal Reserve Bank of New York, SOFR officially replaced the London Interbank Offered Rate (LIBOR) after regulatory investigations into manipulation in the LIBOR setting process.
Unlike LIBOR (which relied on subjective interbank borrowing estimates), SOFR is based on actual, observable transaction data in the multi-trillion-dollar US Treasury repurchase (repo) market. Most modern Adjustable-Rate Mortgages (ARMs) use 30-day Average SOFR as their underlying index.