SOFR vs. EFFR: Secured and Unsecured Overnight Rates

The New York Fed publishes both rates, which can make them look like two readings of one market. They are not. SOFR is a broad measure of the general cost of financing Treasury securities overnight through repurchase agreements. EFFR is calculated from overnight federal-funds transactions, which are unsecured dollar borrowings in the federal-funds market. The market participants, collateral and data submitted to the rate administrator differ.

That distinction matters when reading a chart, loan term sheet, swap confirmation or futures contract. A label such as “overnight rate” does not tell you whether the underlying transaction was secured, which institutions traded, how a period is compounded, or which date the displayed value represents. Start with the named benchmark and the contract’s own calculation rules.

The New York Fed reference-rate overview defines these benchmarks and related rates. This guide compares the underlying overnight measures; for the separate comparison between products, see SOFR futures vs. Fed Funds futures.

A repo is a collateralized financing transaction structured as a sale of securities with an agreement to repurchase them later. In the market behind SOFR, Treasury securities support overnight dollar borrowing. The collateral changes the economics: the cash provider receives securities under the transaction terms, while the borrower obtains cash and agrees to reverse the exchange.

The New York Fed builds SOFR from Treasury repo transaction data across several market segments. Its current methodology includes the trades used for the Broad General Collateral Rate plus transactions cleared through FICC’s Delivery-versus-Payment repo service. A DVP trade identifies the specific securities delivered. When a cash lender particularly wants one issue, that “special” security may finance at a lower rate than general collateral. To limit the effect of specials on a measure of general financing cost, the methodology removes 20% of the lowest-rate DVP transaction volume each day. That adjustment does not remove every special-collateral trade.

SOFR is a transaction-based market measure, not a rate offered to every company or household. A borrower’s actual secured funding cost can differ with its collateral, counterparty, size, term, haircuts and access to the repo market. The SOFR data page and the reference-rate methodology describe the input segments and calculation.

The federal-funds market consists of domestic unsecured dollar borrowings by depository institutions from other depository institutions and certain other entities, primarily government-sponsored enterprises. No Treasury security is pledged as collateral in the transaction defining this market. The New York Fed calculates EFFR from overnight federal-funds transactions reported through the Federal Reserve’s FR 2420 collection.

EFFR is a measured market rate, not the target range announced by the Federal Open Market Committee. The FOMC sets a target range for the federal-funds market. The EFFR is calculated from transactions that occurred; the New York Fed’s monetary-policy implementation tools, including interest on reserve balances, help keep overnight rates consistent with the policy framework. A daily EFFR print therefore is not itself an FOMC decision or a promise about a future rate.

The EFFR page gives the market definition and rate publication details. The New York Fed’s monetary-policy implementation overview explains the target range and the tools used to support it.

Both SOFR and EFFR are calculated as volume-weighted medians and, under the current methodology, are rounded to the nearest basis point. A volume-weighted median orders eligible transactions by rate and finds the rate at the 50th percentile of transaction volume. Large transactions therefore influence the distribution according to their volume; this is not a simple average of quoted rates.

The shared statistic does not make the two rates interchangeable. EFFR’s sample is unsecured federal-funds transactions. SOFR’s sample is secured Treasury repo transactions from multiple segments, with the DVP adjustment described above. Each rate summarizes its own market on its own terms. The New York Fed’s methodology page describes the volume-weighted median and the treatment of each data set.

A benchmark spread can be calculated for an aligned date, but it is not automatically a pure measure of credit risk, a guaranteed basis trade, or a borrowing quote available to one participant. Before comparing rates, identify the transaction date, the market, the rate definition and any difference between the contract periods.

Both published rates refer to overnight transactions from the prior business day, but their publication schedules do not use one universal holiday calendar. SOFR is published at about 8:00 a.m. Eastern Time on Treasury-repo publication days; EFFR is published at about 9:00 a.m. Eastern Time on New York Fed business days. The SOFR publication calendar follows the SIFMA calendar for U.S. government-securities trading, while EFFR follows the New York Fed holiday schedule.

The calendars can separate even when the date is not an ordinary weekend. In a notice for July 3, 2026, the New York Fed said SOFR would not be published because the Treasury repo market followed the SIFMA holiday, while the EFFR publication schedule was unchanged. That dated example is about publication timing, not a claim that either rate was higher or lower. See the New York Fed’s July 2026 notice before combining observations around that date.

When matching a chart or contract, store both the rate’s value date and publication date. A one-day alignment error can create a false spread around holidays or operational changes. Also check whether a downstream contract uses a lookback, observation shift, lockout, fallback or another published-rate rule; the benchmark page alone does not define every contract’s accrual period.

The daily SOFR is one overnight observation. The New York Fed also publishes backward-looking compounded SOFR Averages for rolling 30-, 90- and 180-calendar-day periods and a SOFR Index that supports custom compounded periods. The average is not a forward prediction, and it is not the same number as the single-day SOFR observation. The SOFR Averages and Index page and its methodology explain weekend, holiday and day-count treatment.

EFFR can also appear inside a contract-defined average. For example, 30-Day Federal Funds futures have their own settlement rules for daily EFFR observations. SOFR-linked loans, swaps and futures may use daily compounding or another specified convention. Read the actual contract for its observation window, business-day adjustment, day-count denominator, payment lag and any fallback. A benchmark name by itself is not a complete cash-flow instruction.

For related market mechanics, compare SOFR futures final settlement with the reference-rate article here. The futures guide explains contract-specific settlement; this guide explains what the underlying rate measures.

Assume, purely for illustration, that on one aligned observation date SOFR is 4.33% and EFFR is 4.31%. The difference is 0.02 percentage point, or 2 basis points. On $100 million for one day, a simple ACT/360 calculation gives a difference of about $55.56: $100,000,000 × 0.0002 × 1/360. This calculation isolates the arithmetic only; it is not a market quote, a current rate, or a comparison of two loans available to the same borrower.

The two rates come from different transaction markets, so their spread can change with conditions in Treasury repo and unsecured federal-funds trading, as well as their respective data, dates and contract conventions. It is not enough to see one rate above the other and infer an arbitrage or a policy signal. The FOMC’s target range is a separate policy setting; longer-term Treasury yields also reflect market expectations and other forces, as explained in why long-term Treasury yields can rise after Fed rate cuts.

For a practical comparison, write down the benchmark, value date, publication date, reference period, collateral status, compounding method and day-count basis. Then compare the cash flows specified by the product or financing agreement. Do not substitute SOFR for EFFR, or the reverse, without checking the governing terms.