17 August 2026 · Risk Free Rates Team
SOFR vs. EFFR: What's the Difference?
SOFR and the Effective Federal Funds Rate both come from the NY Fed and sit close together, but they measure completely different markets.
Two Fed-Published Rates, Two Different Markets
Open the New York Fed's reference rates page on any given morning and you'll see two overnight rates published within an hour of each other: SOFR and the Effective Federal Funds Rate (EFFR). Both come from the same institution, both update daily, and both usually sit within a few basis points of each other. It's easy to assume they're measuring the same thing. They aren't.
SOFR and EFFR are calculated from two entirely different markets — one collateralized, one not — and understanding that difference matters if you're pricing a loan, reading a rate disclosure, or just trying to make sense of financial news that references "overnight rates."
What SOFR Measures
The Secured Overnight Financing Rate is a secured rate: it's a volume-weighted median of transactions in the Treasury repurchase (repo) market, where cash lenders accept U.S. Treasury securities as collateral. The New York Fed calculates it from tri-party repo data, GCF Repo data, and bilateral Treasury repo transactions cleared through FICC, and publishes it around 8:00 a.m. ET each business day. Because it's backed by Treasuries, SOFR reflects the cost of the safest, most liquid form of overnight borrowing available. The underlying market handles roughly $1 trillion in transactions a day, which is part of why regulators pushed it forward as LIBOR's replacement.
What EFFR Measures
The Effective Federal Funds Rate is unsecured: it's a volume-weighted median of overnight transactions in the federal funds market, where banks lend each other reserve balances with no collateral changing hands. The New York Fed calculates EFFR from the FR 2420 Report of Selected Money Market Rates and publishes it around 9:00 a.m. ET, one hour after SOFR, for the prior business day's activity. EFFR is the rate the Federal Open Market Committee (FOMC) actually targets when it sets monetary policy — when the Fed announces a target range, it's committing to keep EFFR inside that band.
Current Levels
As of mid-August 2026, the two rates sit close together:
| Rate | Level | As of |
|---|---|---|
| SOFR | 3.62% | Aug 13, 2026 |
| EFFR | 3.63% | Aug 13, 2026 |
| Fed funds target range | 3.50%–3.75% | Set July 29, 2026 FOMC |
That's a gap of roughly one basis point — well within the normal range. The FOMC held its target range steady at its July 29, 2026 meeting on a 9-3 vote, with three regional bank presidents (Hammack, Kashkari, and Logan) dissenting in favor of a 25 basis point hike, citing elevated inflation tied to supply-side pressures including energy prices. Both SOFR and EFFR are printing comfortably within the current 3.50%–3.75% band.
Why the Two Rates Usually Track Each Other — and When They Don't
Under normal conditions, SOFR and EFFR move in a tight band because both are anchored to the same broad level of short-term rates set by Fed policy, and arbitrage between the repo and fed funds markets keeps them from drifting far apart. But because SOFR is a pure market rate reflecting actual repo supply and demand — rather than an administered or targeted rate — it can spike independently of Fed policy when repo market liquidity gets tight.
The clearest example remains September 2019, when a collision of corporate tax payment deadlines and a wave of Treasury settlements drained cash from the repo market simultaneously. SOFR jumped from 2.43% on September 16 to an intraday high near 10% on September 17, before settling at 5.25% that day — a move EFFR never came close to making, because the unsecured fed funds market wasn't hit by the same collateral and settlement mechanics. The New York Fed responded with emergency repo operations, and the episode is a big part of why the Fed now runs a Standing Repo Facility as a permanent backstop. It's also why our explainer on SOFR spikes is worth a read if you're relying on daily SOFR prints rather than a compounded average.
Why This Matters If You Have a SOFR-Based Loan
If your loan, credit facility, or floating-rate note references SOFR, the EFFR comparison is mostly background context — but it's useful background. EFFR tells you where the Fed's policy rate actually sits day to day, which is the anchor most other short-term rates (including SOFR) orbit around. When financial commentary says "the Fed held rates steady," it's EFFR staying inside the target range that's being described. SOFR is what shows up in your loan's interest calculation, and it can diverge from that policy anchor briefly during periods of repo market stress, which is one reason ARRC-recommended loan conventions use compounded or averaged SOFR (in arrears or via Term SOFR) rather than a single day's overnight print — smoothing out exactly this kind of short-term noise.
Frequently Asked Questions
Is SOFR the same as the federal funds rate? No. SOFR is a secured rate from the Treasury repo market; the federal funds rate (measured day to day as EFFR) is an unsecured rate from interbank lending. They typically track closely but are calculated from entirely different transactions.
Which rate does the Fed actually control? The FOMC sets a target range for the effective federal funds rate. SOFR is not a Fed policy tool — it's a market-determined rate that the Fed publishes but doesn't directly target, though it generally stays close to the fed funds range.
Why did SOFR replace LIBOR instead of EFFR? The Alternative Reference Rates Committee (ARRC), convened by the Federal Reserve, selected SOFR because it's fully transaction-based with a much deeper underlying market (~$1 trillion daily) than either LIBOR or the fed funds market, making it more resistant to manipulation and more representative of actual borrowing costs.
Can SOFR and EFFR diverge significantly? Yes, though it's uncommon. Repo market stress — like the September 2019 episode, when SOFR spiked to nearly 10% intraday while EFFR stayed flat — can push SOFR well above EFFR for a day or two before the Fed's Standing Repo Facility and market forces bring it back in line.
Compare Rates and Calculate Your Loan
Check current SOFR, SONIA, €STR, and TONA levels side by side, look up related terms in our RFR glossary, or use our free RFR Loan Calculator to compute compounded-in-arrears or Term SOFR interest with a full daily rate ledger.