SONIA
Sterling Overnight Index Average — the sterling (GBP) risk-free benchmark rate, published by the Bank of England.
SONIA — Sterling Overnight Index Average
SONIA (Sterling Overnight Index Average) is the benchmark interest rate for British pound sterling (GBP) financial contracts. It measures the rate paid on unsecured overnight sterling transactions in the London money market.
Key Facts
- Published by: Bank of England
- Day count convention: Actual/365 Fixed
- Available (Reformed SONIA) from: 23 April 2018
- Calculation method: Trimmed mean of eligible unsecured overnight deposits, weighted by volume
- Daily volume: Typically £40–£80 billion
Reformed SONIA vs Original SONIA
The Bank of England reformed SONIA in April 2018 to broaden its transaction base and align it with IOSCO Principles for Financial Benchmarks. The reformed rate covers a wider range of deposit types and uses a trimmed mean methodology, making it more robust.
SONIA replaced GBP LIBOR, which ceased on 31 December 2021.
Key Difference from SOFR
Unlike SOFR (which is secured by Treasury repo collateral), SONIA is unsecured — it reflects deposits between financial institutions without collateral. As a result, SONIA may carry a small credit/liquidity premium above a purely secured rate.
Both SOFR and SONIA are considered risk-free rates (RFRs) because they reference overnight transactions with minimal credit risk.
Use in Loans
SONIA is used in GBP floating-rate loans, bonds, and derivatives. Like SOFR, it is typically applied using compounded in arrears methodology with a lookback period of 5 business days.
Use the RFR Loan Calculator to calculate SONIA-based loan interest using Act/365 compounding.