SOFR Academy Submission to the Treasury Market Practices Group on GSE Ownership Structure Changes and the Potential Role of FXI in Credit Risk Management
SOFR Academy has submitted a response to the Treasury Market Practices Group consultation examining how potential changes to the ownership structure of Fannie Mae and Freddie Mac could affect agency MBS market liquidity, pricing, and functioning.
The submission highlights how transparent, transaction-based credit spread benchmarks such as FXI could complement SOFR by helping market participants measure, price, and manage credit risk under alternative GSE funding regimes. It also discusses how credit spread benchmarks may support more resilient funding markets, more effective hedging frameworks, and a more adaptable post-LIBOR financial architecture.
More broadly, the submission considers how tools that distinguish between interest rate risk and credit spread risk could become increasingly important if agency MBS markets evolve toward a more explicit pricing of credit risk.
Read the full submission to the TMPG (PDF)
This note is provided for informational purposes by SOFR Academy, Inc. (Sofr.org), a financial engineering firm that develops tools to support global financial market participants and public institutions. The firm’s products are designed to complement (near) risk-free rates and promote well-functioning credit markets. Headquartered in New York, SOFR Academy works with market participants, academics, and regulators to strengthen financial system resilience and transparency. SOFR Academy’s backers include 8VC, and former Goldman Sachs partner Robert Litterman who developed the Black–Litterman model together with Fischer Black in 1990. For more information, please visit www.SOFR.org.
This note is not designed to be taken as advice or a recommendation for any investment decision or strategy. Readers should make an independent assessment of relevant economic, legal, regulatory, tax, credit, and accounting considerations and determine, together with their own professionals and advisers, if the use of any index is appropriate to their goals. Neither the USD Across-the-Curve Credit Spread Index (AXI), nor the USD Financial Conditions Credit Spread Index (FXI) are associated with or sponsored by the Federal Reserve Bank of New York or any regulatory authority.
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