It Looks Like Bankers Are Finally Waking Up to Sonia

(Bloomberg) -- U.K. regulators are seeing some success as they try to shift the sterling bond market away from scandal-hit Libor.

Five all-new floating-rate pound notes have come to market this year, and all of them have been tied to the Sterling Overnight Interbank Average rather than Libor. FMS Wertmanagement, Lloyds Banking Group Plc and International Finance Corp were the latest names to join the offering list.

The five deals, totaling at least 3.5 billion pounds ($4.5 billion), suggest bankers are paying attention after the Financial Conduct Authority urged them to abandon Libor ahead of the benchmark’s official retirement in 2021. It also shows that investors have gotten to grips with Sonia’s complexity following a trickle of 2018 sales by issuers including European Investment Bank, Lloyds and Santander UK Plc.

“This product is now very much in the mainstream,” said Kerr Finlayson, head of public sector debt syndicate at Royal Bank of Canada, which worked on the FMS Wertmanagement sale. “We would attribute this to a standard format of bond issuance, rhetoric from the regulator, as well as increased buy-in from issuers who are keen to be at the forefront of this evolution.”

IFC may price its benchmark deal Tuesday, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it.

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