Request your interest rate cap execution checklist

The world is full of market and political shocks. Their timing/impact on markets are difficult to predict. Implementing a risk management policy and reviewing it regularly allows you to understand your material risk exposures, and how to control those risks based on predefined policy parameters.

On Friday, October 23, the International Swaps and Derivatives Association (ISDA) launched the IBOR Fallbacks Supplement and Protocol, which provides a framework for transitioning interest rate derivatives from USD LIBOR to SOFR.

Negative interest rates inch closer to reality in the UK as the Bank of England checks on banks’ readiness. The following summarises why the topic is being raised again and a reminder of previous Chatham insights on the subject matter.

These frequently asked questions address some of the common issues that commercial real estate borrowers face when considering an interest rate swap. These include swap rates and mechanics, prepayment/breakage, documentation, and LIBOR transition.

On Wednesday, September 9, Chatham executed the first SOFR-indexed interest rate cap on behalf of a commercial real estate (CRE) borrower in conjunction with the closing of a CBRE-originated Freddie Mac financing.

The Fed has adopted a “flexible form of average inflation targeting” that aims for inflation rate to average 2% over time. Under this framework, the Fed funds rate will likely stay low for longer. Also, there will be an elevated emphasis on the maximum employment objective of the dual mandate.

An interest rate forward curve for a market index is, at a discrete moment in time, a graphical representation of the market clearing forward rates for that index.

The Agencies are on track to transition to SOFR as an index for floating-rate loans by EOY. Applications for SOFR indexed loans may be seen as early as this month. Liquidity of SOFR interest rate caps is limited but Chatham is optimistic that they will be available for closing these loans.