Goodbye Sonia flat: banks rethink swaps with bond collateral

Higher discount rate can cut payouts to in-the-money clients by millions

A fond farewell? Some traders are 'exasperated' by the loss of Sonia flat

Imagine the scene: you are a UK pension fund, with some big, long-dated, fixed-rate receiver swaps outstanding. Record-low interest rates mean you are heavily in the money, and you want to bank some of those paper gains, so you decide to recoupon the trade – essentially, bringing down the rate you receive in return for a payout.

The dealer, though, says it has changed the way it values the trade – it is now using a different, higher rate to discount future cashflows, meaning your payout has

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here