DEFINITION of 'Sterling Overnight Interbank Average Rate - SONIA'

An index that the tracks Sterling overnight funding rates for trades that occur in off hours. The Sterling overnight funding rate is a reflection of the depth of the overnight business in the market.

BREAKING DOWN 'Sterling Overnight Interbank Average Rate - SONIA'

The Sterling Overnight Interbank Average Rate (SONIA) was established in 1997 by the Wholesale Markets Brokers' Association in Great Britain. Prior to the SONIA the Wholesale Markets Brokers' Association had no Sterling overnight funding rate. This void created volatility in England's overnight interest rates. When the SONIA was created, it gave a stability to overnight rates and also encouraged the creation of the Overnight Index Swaps markets and the Sterling Money Markets in Great Britain.

RELATED TERMS
  1. Overnight Rate

    The overnight rate is the interest rate at which a depository ...
  2. Overnight Return

    One of the two components of the total daily return generated ...
  3. Bank Rate

    The interest rate at which a nation's central bank lends money ...
  4. Overnight Limit

    The number of currency positions a trader can carry over from ...
  5. Rollover Credit

    Interest paid to a forex trader who holds a position overnight. ...
  6. Intraday Return

    One of the two components of the total daily return generated ...
Related Articles
  1. Trading

    Interpreting Overnight Action In The Index Futures

    Overnight action in index futures sets the tone for the U.S. market day. Traders can use 24-hour index futures charts to predict action in the coming day.
  2. Insights

    Effects of OIS Discounting for Derivative Traders

    The use of OIS discounting has important implications for derivative valuations and could positively or negatively impact a trader's profit or loss.
  3. Personal Finance

    Explaining Prime Rate

    Prime rate is the interest rate banks charge their best (e.g. prime) customers.
  4. Investing

    Find The Right Discount Rate Amid Post-2007 Risks

    OIS discounting has become part of standard valuation techniques, in a market in which there is more uncertainty and less proxies for the risk-free rate.
  5. Trading

    Will Article 50 Cause Fresh Sterling Declines?

    Since the UK voted to leave the European Union, the pound has been the barometer of pain and weakness.
  6. Investing

    How You Could Have Made Money Between the Trump Win and Opening Bell

    There's money to be made on election night, even after the markets close. Here's how you could have done it last night.
  7. Personal Finance

    How Interest Rates Can Go Negative

    Central banks from Europe to Japan have implemented a negative interest rate policy (NIRP) in order to stimulate economic growth.
  8. Personal Finance

    How Interest Rate Cuts Affect Consumers

    Traders rejoice when the Fed drops the rate, but is it good news for all? Find out here.
  9. Investing

    How Interest Rates Affect Mutual Funds

    Find out how changing interest rates impact mutual funds, including bond and money market funds, and how higher rates can discourage investors.
RELATED FAQS
  1. Is the prime rate in the US different from the federal funds rate?

    Learn how the federal funds rate affects fluctuations in the prime rate and how following your bank's prime rate can help ... Read Answer >>
  2. What is the difference between LIBID and LIBOR?

    Both LIBID and LIBOR are rates primarily used by banks in the London interbank market. The London interbank market is a wholesale ... Read Answer >>
  3. What are the implications of a high Federal Funds Rate?

    Learn the implications of a high federal funds rate, which include constriction of the money supply, a stronger dollar and ... Read Answer >>
  4. What risks does the dealer (lender) in a reverse repurchase agreement take on?

    Read about the lender risks of participating in reverse repurchase agreements or for dealers who use the Fed's overnight ... Read Answer >>
  5. What is a liquidity squeeze?

    A liquidity squeeze occurs when a financial event sparks concerns among financial institutions (such as banks) regarding ... Read Answer >>
  6. What is an absolute rate?

    An absolute rate is easy to understand once you know the basics of an interest rate swap. An absolute rate is the fixed rate ... Read Answer >>
Hot Definitions
  1. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  2. Absolute Advantage

    The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost ...
  3. Nonce

    Nonce is a number added to a hashed block, that, when rehashed, meets the difficulty level restrictions.
  4. Coupon

    The annual interest rate paid on a bond, expressed as a percentage of the face value. It is also referred to as the "coupon ...
  5. Socially Responsible Investment - SRI

    Socially responsible investing looks for investments that are considered socially conscious because of the nature of the ...
  6. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
Trading Center