Sterling Overnight Interbank Average Rate (SONIA)

The Sterling Overnight Interbank Average Rate (SONIA) is the average interest rate at which banks lend money to each other overnight in the UK sterling money market. It is calculated by the Bank of England and is published each day.

SONIA is used as a benchmark interest rate for a variety of financial products, such as loans, mortgages, and bonds. It is also used as a reference rate for calculating the interest payable on some financial instruments, such as swaps and futures.

The SONIA rate is calculated by taking the average of all overnight unsecured lending transactions in the UK sterling money market. The transactions are taken from a panel of banks that are selected by the Bank of England. The panel banks are required to submit details of all their overnight unsecured lending transactions to the Bank of England on a daily basis.

The SONIA rate is calculated using a volume-weighted average. This means that the transactions with the largest volumes are given the most weight in the calculation of the average rate.

The SONIA rate is a floating rate, which means that it changes over time. The rate is influenced by a number of factors, including the level of demand for overnight lending, the level of supply of overnight lending, and the level of interest rates in the economy.

The SONIA rate is an important benchmark interest rate for the UK financial markets. It is used as a reference rate for a variety of financial products and is also used to calculate the interest payable on some financial instruments. The SONIA rate is a floating rate, which means that it changes over time. The rate is influenced by a number of factors, including the level of demand for overnight lending, the level of supply of overnight lending, and the level of interest rates in the economy.