Libor concerns prompt switch to Sonia swaps

Move by some UK LDI managers has steepened Sonia-Libor basis

BoE-Sonia-swap montage

Certain liability-driven investment funds are avoiding entering into interest rate swaps linked to sterling Libor and are instead adopting the new risk-free rate in the UK, the sterling overnight index average (Sonia), according to bankers and asset managers.

The move, they say, is partly being prompted by concerns over Libor’s long-term future given global regulators’ keenness to wean the industry off the embattled interest rate benchmark. In preparation for the switch to Sonia, UK authorities

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