What is SOFR?

SOFR is like the heartbeat of money, it tells us how much it costs to borrow money from big banks.

Imagine you and your friend are sharing toys at recess. If your friend wants to borrow your favorite toy for a while, they might give you a snack in return. SOFR is like that snack, it's the average amount of snacks (or money) people pay to borrow money from big banks every day.

Think of big banks as the toy lender at recess. Every day, they lend money to other banks, just like your friend might borrow a toy. The snack price, or interest rate, changes depending on how many snacks (money) are needed and how many people want to borrow.

Sometimes there's a big game happening at recess, and more kids want to borrow toys, that means the snack price goes up because there’s more demand. When fewer kids want to borrow, the snack price might go down.

SOFR helps everyone know what the average snack price is, so they can plan how much money they'll need to borrow or lend. It's like knowing what snack you’ll get before you trade your toy! SOFR is like the heartbeat of money, it tells us how much it costs to borrow money from big banks.

Imagine you and your friend are sharing toys at recess. If your friend wants to borrow your favorite toy for a while, they might give you a snack in return. SOFR is like that snack, it's the average amount of snacks (or money) people pay to borrow money from big banks every day.