Invesco Indexing Consultation on Potential Replacement Rates ahead of the Cessation of LIBOR

Invesco Indexing is conducting a consultation on proposed replacement rates for USD London Interbank Offered Rate (“LIBOR”) and London Interbank Bid Rate (“LIBID”) used in select Invesco Indexing indexes. The consultation will run through November 30^th, 2021 at which time, having received stakeholder feedback, Invesco Indexing will publish conclusions from the consultation.

Earlier this year the Financial Conduct Authority (FCA) announced dates on which panel bank submissions for LIBOR settings will cease, after which LIBOR rates will no longer be available. As a result, Invesco Indexing is seeking feedback on the potential use of alternative reference rates. USD LIBOR and LIBID rates are currently used for excess return calculations and for the reinvestment rate of return for certain sources of cash, respectively. Details on the use case by index and the proposed reference rate replacement are listed at the end of this consultation. The proposed alternative reference rates are the Secured Overnight Financing Rate (“SOFR”), Euro Short-Term Rate (“ESTR”), and Tokyo Overnight Average Rate (“TONA”). The proposals can be categorized as follows:

• In fixed income indexes with only USD or multi-currency denominated constituents, SOFR is the proposed alternative reference rate,
• In fixed income indexes with only EUR denominated constituents, ESTR is the proposed alternative reference rate,
• For fixed income indexes with only JPY denominated constituents, TONA is the proposed alternative reference rate, and
• For indexes utilizing 3 Month USD LIBOR as part of an excess return calculation, SOFR is the proposed alternative reference rate.   

Invesco Indexing welcomes your feedback on these proposals through Tuesday November 30^th. If adopted, updates to reference rates used within Invesco indexes would be implemented after the close of business on December 31^st, 2021.

To share your preference for these options, or provide additional feedback, please contact Invesco Indexing at IndexSupport@invesco.com.

A summary of the proposed changes by index is provided below: