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ARTICLE · 01 OCTOBER 2020

An Update On Interest Rate Conventions In The SONIA-Linked Floating Rate Note Markets

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An Update on Interest Rate Conventions in the SONIA-Linked Floating Rate Note Markets.

United KingdomFinance and Banking
James Taylor
James Taylor
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The early take-up in 2019 of SONIA in the Sterling floating rate note markets was made possible because SONIA (unlike SOFR and many other risk free rates) was already in use in the well-established market of sterling denominated overnight indexed swaps (OIS). This fortuitous fact meant that regular issuers of Sterling LIBOR-linked securities could, with some degree of confidence, consider SONIA as a "ready-baked" alternative to Sterling LIBOR that was supported by a pool of liquidity in the swaps and futures markets, priced by reference to observable transactions entered into by buyers and sellers in these markets and subject to standardised conventions for interest rate determination.

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