SONIA – the alternative floating rate

Since the formal recommendation of SONIA in the UK as the preferred risk-free reference rate to replace Sterling LIBOR as a reference rate in financial products, market participants have been focusing on how to transition to using SONIA. The SONIA floating rate note (FRN) market was kicked off in earnest in by the public sector in June 2018, swiftly followed by private sector issuance by financial institutions in the UK.

In this note we examine recent SONIA FRN issuance and highlight the issues that market participants should consider in relation to issuance of SONIA FRNs.