The London Interbank Offered Rate (“LIBOR”), which had been the world’s prevailing reference rate for financial instruments, no longer exists as of July 1, 2023. In 2018, the Federal Reserve’s Alternative Reference Rate Committee (“ARRC”) selected Secured Overnight Financing Rate (“SOFR”) to replace USD LIBOR.

Many Farmer Mac LIBOR exposures had fallback language for the LIBOR transition. Following the approach outlined by the Federal Reserve Board’s final rule (from December 2022) that implements the Adjustable Interest Rate (LIBOR) Act and the Federal Reserve Board’s implementing rule (collectively, “the LIBOR Act”), Farmer Mac replaced the LIBOR index with Term Secured Overnight Financing Rate (“Term SOFR”), published by CME Group Benchmark Administration, Ltd., plus a spread adjustment based on the tenor of the interest rate period for any LIBOR exposures with no fallback language or if there is fallback language based on a bank survey or at Farmer Mac’s discretion.

To ensure a smooth transition for its customers and their borrowers, Farmer Mac actively monitored and prepared for the LIBOR transition for several years, including by participating in numerous industry-wide and regulatory advisory committees. As part of our preparations, we are sharing the following answers to some of the most frequently asked questions about LIBOR.

LIBOR Frequently Asked Questions

What is LIBOR?
What happened with LIBOR?
What replaced LIBOR in the U.S. capital markets?
What is CME Term SOFR?
What happened to Farmer Mac debt securities indexed to LIBOR?
What happened to Farmer Mac loan products indexed to LIBOR?
What is the LIBOR Act?
What are the spread adjustments with Term SOFR?
Where should I go with questions?