The Secured Overnight Financing Rate, commonly referred to as SOFR, is an interest rate benchmark determined from data of overnight repurchase agreements in the U.S. Treasury Market. SOFR is published daily by the Federal Reserve Bank of New York and is considered a transparent and reliable measure of the cost of borrowing cash overnight against U.S. Treasury securities as collateral. As an alternative to other benchmarks like LIBOR, SOFR is rapidly becoming more mainstream in financial calculations due to its risk-free nature.

SOFR is used in a variety of financial products and agreements, including loans, derivatives, and securities. For example, in corporate financing, a company may have a revolving credit facility tied to SOFR as the reference interest rate plus a fixed margin. Additionally, SOFR is crucial for tasks such as month-end close, where interest payments calculated using SOFR may need to be reconciled on the balance sheet.

Its importance lies in its robustness, as it is based on actual market transactions rather than estimates or submissions, making it a stable and preferred choice in modern financial systems. With Easy Month End or similar tools, tasks involving SOFR-related calculations or reconciliations, such as quarter-end or year-end processes, can be managed efficiently.