This User’s Guide to AXI & FXI is being made available to interested readers in both the private sector and Official sector to stimulate discussion and elicit comments. This document will be updated over time.
This guide explains how market participants can use novel credit-spread reference benchmarks—the Across-the-Curve Credit Spread Index (AXI) and the Financial Conditions Credit Spread Index (FXI)—which work in conjunction with the Secured Overnight Financing Rate (SOFR). The development of AXI and FXI commenced in 2021, following a request from ten U.S. Regional banks for a credit sensitive supplement to SOFR. The indices are underpinned by a broad set of observable transactions from across the maturity curve ranging from overnight to five years, with weights that reflect both transaction and issuance volumes. Referencing this substantially larger pool of market transactions avoids the risks of illiquidity and statistical corruption or manipulation. These credit-spread reference benchmarks have been reliably produced and published under a diverse range of market conditions, including stress events such as the onset of the COVID-19 pandemic in 2020 and the regional banking sector turmoil in 2023. AXI and FXI address specific challenges in bank lending where the absence of a credit sensitive element leads to mismatches between banks’ assets and liabilities that can hamper the provision of credit, especially during periods of economic stress. It has been shown that usage of AXI and FXI can mitigate this potential constraint on credit supply. This paper provides an overview of the need for these credit spread reference benchmarks in commercial lending markets, their unique construction design, their potential application in cash products and derivatives markets, and the independent confirmation of compliance with relevant internationally developed and agreed principles for financial benchmarks. The inclusion of AXI and FXI in SOFR-based lending products will enhance the efficiency, transparency, and stability of financial markets in alignment with U.S. policy objectives.
Download the User’s Guide to AXI & FXI here.
