Does SOFR-linked debt cost borrowers more than LIBOR-linked debt?
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We investigate if the benchmark transition from London Interbank Offered Rate (Libor) to Secured Overnight Financing Rate (SOFR) affects the costs of borrowing floating rate debt. The primary market for dollar-denominated floating rate notes (FRNs) provides an ideal laboratory to study these e ects. Comparing the spreads of FRNs linked to LIBOR and SOFR, issued by the same entity during the same month, we find a significantly lower yield spread for SOFR-linked debt after adjusting for the maturity-matched spreads from the swap market. In addition, despite identification challenges, we observe a quantitatively similar pattern in the syndicated loan market.