UK ABS market mulls prospect of negative Sonia

Trading stock interest rate index adobe stock 230x150 AS
By Tom Brown
13 Aug 2020

Investors and research houses are forecasting for Sonia to follow Gilts into negative yields next year, which could force issuers to cover themselves against a hedging mismatch in auto ABS deals.

The forward curve suggests that the one-month Sonia rate could become negative from February 2021, said Bank of America in a research note, and go as low as  minus 0.16% in July 2022, staying negative until April 2025.

In Europe, after Euribor rates plunged to sub-zero levels, auto ...

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