EBRD to bring new coupon structure for Sonia FRNs but questions linger on rationale

By Burhan Khadbai
18 Feb 2020

The European Bank for Reconstruction and Development will be introducing a new coupon calculation methodology for Sonia-linked floating rate notes with its deal on Wednesday. The trade will use the structure that it pioneered for its Sofr debut last summer. The leads say this new format will be helpful should Sonia move towards a single index, like Sofr will in March. But some bankers away from the deal are unconvinced that the new method will appeal to investors.

On Tuesday, EBRD mandated Barclays, HSBC, NatWest Markets and RBC Capital Markets for a February 2023 Sonia-linked FRN.

While the coupon structure sticks with the conventional daily compounded rate, it is adopting a five day observation ‘shift’ as opposed to a ‘lag’, which has been ...

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