Fatally wounded as it is by scandal, the London Interbank Offered Rate (Libor) will almost certainly be replaced by the Sterling Overnight Index Average (Sonia) as the primary sterling interest rate benchmark for bonds, loans and derivatives. The European Investment Bank’s (EIB) recent £1bn ($1.3bn) Sonia-linked floating rate note issue may mark the real beginning of that transition in the bond markets. HSBC was a joint lead.
Sonia is not exactly a newborn, having been launched in 1997. Its use in the sterling overnight indexed swaps market has grown steadily, with daily volumes rising from £10bn to £15bn in 2010 to £40bn to £50bn in 2018, according to Bloomberg. In the bond markets, however, it has been virtually unknown.
