Private lenders who borrow at floating rates indexed to the Secured Overnight Financing Rate (SOFR) and lend at fixed rates bear the risk of interest rate increases diminishing their net interest spread and impairing the resale value of the loan. Now, they can hedge this risk using Eris SOFR Swap futures (Eris SOFR) to match the rate terms of financing with the rate terms of the loan, offsetting losses from interest rate increases.
With Eris SOFR, private lenders can…
- Expand product offering to include fixed rate loans, confidently lending at competitive fixed rates while borrowing remains indexed to SOFR.
- Price loans to match hedges by referencing the transparent and executable Eris SOFR curve.
- Hedge efficiently during loan aggregation in sizes as small as $100,000, allowing for more competitive bulk pricing.
- Hold Eris SOFR hedges for the entire duration of on-balance-sheet loans (with no requirement to roll positions quarterly, unlike traditional futures) or lift hedges when loans are sold.
- Track transparent pre-trade and post-trade prices, supporting efficient risk management and operations.
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