The USD interest rate swaps market has been transitioning from LIBOR to SOFR for some time. In the "old days" when swaps reset against LIBOR underlyings, there were a few "market convention" ways of trading swaps in the inter-dealer market. Basically, participants traded the following ways:
- semi-annual 30/360 on rate
- annual Act/360 on rate
- vs. cash Treasury notes/bonds on spread
I've been retired from trading for a long time, and have a few questions about the current state of the world:
Is there any trading of new swaps that reset against a LIBOR underlying? (or has the market fully transitioned to SOFR underlyings?)
Do swaps that trade in the inter-dealer market reset against SOFR in-arrears or some sort of calculated "term SOFR" rate (e.g. the term SOFR rates provided by CME)?
If the answer to question 2 is "swaps reset against SOFR in-arrears", then why is there all this talk about the term SOFR rate? Is the term SOFR rate just used for pricing?
Does the market actively trade SOFR swaps on spread to cash U.S. Treasuries (similar to the way that LIBOR swaps were quoted as a "spread over")?