How do SOFR and €STR actually work?
The replacements were designed against LIBOR's failure: anchor the benchmark in a market with real, verifiable volume. Two major jurisdictions did that — and reached opposite conclusions about which market.
SOFR: secured, and enormous
The Secured Overnight Financing Rate has been published by the Federal Reserve Bank of New York since 3 April 2018. It is a volume-weighted median of overnight repurchase agreements collateralised by US Treasuries, drawn from three segments of the market:
- tri-party repo,
- GCF Repo,
- and bilateral Treasury repo cleared through FICC's delivery-versus-payment service.
Two design points follow. First, it rests on well over a trillion dollars of transactions every day — the exact opposite of LIBOR's problem. Second, because it is secured by Treasuries, it contains essentially no bank credit risk. It is published at around 8:00am New York time for the previous business day.
The New York Fed publishes two narrower cousins built from slices of the same market: TGCR, the tri-party general collateral rate, and BGCR, the broad general collateral rate. SOFR is the widest of the three. Comparing them on the same day shows how venue and collateral mix shift the number by a basis point or two — a good habit for anyone learning to read this market.
€STR: unsecured, and deliberately so
The euro short-term rate has been published by the ECB since 2 October 2019, and it is built on a different premise. €STR is unsecured. It measures the wholesale overnight borrowing cost of euro area banks — borrowing only, never lending — from financial counterparties: other banks, money market funds, insurers, pension funds. Non-financial corporates are deliberately excluded.
The inputs come from roughly 50 banks' regulatory Money Market Statistical Reporting submissions, so they are transactions a supervisor already sees. The method trims the top and bottom 25% of volume and takes the volume-weighted mean of the middle 50%. It is published at 08:00 CET on the following TARGET business day.
Its predecessor, EONIA, was retired unusually cleanly: from October 2019 it was recalibrated to be simply €STR plus a fixed 8.5 basis point spread, and it was discontinued on 3 January 2022.
The rest of the family
- SONIA — sterling, unsecured overnight, administered by the Bank of England since April 2016 and moved onto its current reformed methodology in April 2018.
- TONA — yen, unsecured.
- SARON — Swiss franc, secured.
There was no global agreement on secured versus unsecured, and that was not a failure of coordination. Each jurisdiction anchored its benchmark in whichever overnight market it actually had the deepest, most reliable data for. The US had a vast Treasury repo market; the euro area had comprehensive unsecured reporting from its banks. Same principle, different raw material.
One consequence worth carrying forward
Because SOFR and €STR are built differently, the gap between them is not a clean read on "the price of dollars versus euros." Comparing them properly means adjusting for the secured/unsecured difference and for the currency basis. Two numbers that look alike on a screen can be measuring different things — a habit of mind worth more than any single fact in this lesson.
In the data
SOFR and its two narrower cousins, on one night, each with the value of the trades behind it:
On 24 September 2026 SOFR fixed at 3.88% on $2,990 billion, while TGCR and BGCR, each measured on about $1,200 billion, fixed at 3.86%. SOFR is the widest of the three: it adds the bilateral cleared repo in which dealers finance specific Treasuries, and those trades pulled its median two basis points above the general collateral rates that night. Same collateral, same night, and the venue alone moved the benchmark.
Try it now
- Below are SOFR, €STR (listed as ESTR) and SONIA on one date, 24 September 2026. Which of the three is secured? Only one row's series name says so; the lesson above tells you about the other two.
- Below is TGCR minus BGCR for every business day from 18 August to 24 September 2026. How many basis points typically separate two general collateral rates from the same market?
- State in one sentence why SOFR's daily transaction volume is the feature that mattered most in its design.