Bloomberg has launched a credit-sensitive index to serve as a supplement to the secured overnight financing rate (SOFR) and support the global transition from interbank offered rates (IBOR).

The Bloomberg Short Term Bank Yield Index (BSBY) is constructed using aggregated and anonymized data that are anchored in transactions of commercial paper, certificates of deposit, USD bank deposits, and short-term bank bond trades – reflecting banks’ marginal funding costs.

BSBY includes a systemic credit spread and term structure, and can be used as a supplement to SOFR in the lending market. Bloomberg has been working closely with market participants to solicit feedback on BSBY and will continue to refine the index. Following this beta period of market feedback, Bloomberg plans to license BSBY for use as a financial benchmark via Bloomberg Index Services Limited, Bloomberg’s authorized benchmark administrator.

The BSBY will be calculated daily and published at 8am ET, and can be accessed via the Bloomberg Terminal. The index is available for five tenors: overnight {BSBYON }, one month {BSBY1M }, three months {BSBY3M }, six months {BSBY6M } and 12 months {BSBY12M }.

“We support efforts to promote liquidity in markets linked to the SOFR benchmark, and will continue to implement solutions to facilitate its adoption,” says Umesh Gajria, head of index linked products at Bloomberg. “Bloomberg’s credit-index capabilities and our deep history in the fixed-income markets position us well to offer BSBY as a solution to support the industry’s IBOR transition needs.”

Bloomberg offers a suite of solutions to support IBOR transition, including scenario analysis to determine the impact of risk-free rates (RFRs) on portfolios. On the Bloomberg Terminal, users can also access fallback datasets to identify IBOR-linked securities in their portfolios and trading services using RFRs. In addition, Bloomberg publishes term and spread adjustments for the fallbacks that the International Swaps and Derivatives Association intends to implement for certain IBORs.