GBP750 million Inaugural 3-Year SONIA Benchmark Using “Observation Period Shift” Methodology

By EBRD  Press Office

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Final Terms


European Bank for Reconstruction and Development (EBRD)


Aaa (Stable) / AAA (Stable) / AAA (Stable)


Global (SEC Exempt) Bearer, New Global Notes


SONIA+25bps, FRN, Daily Compounded SONIA, 5 day observation period shift


GBP750 million

Price Date:

19th February 2020

Payment Date:

27th February 2020 (T+6)

Maturity Date:

27th February 2023

Reoffer Spread:


Lead Managers

Barclays, HSBC, NatWest Markets, RBCCM


Issue Highlights

  • Landmark transaction, marking the inaugural SONIA linked FRN using the “Observation Period Shift” methodology. Thus far, all ~GBP57bn of SONIA issuance launched to date has followed the standard 5 Business Day “Observation Period Lag” methodology.
  • EBRD adopted the shift methodology because it believes that it has 3 main advantages over the lag methodology it had previously used: most importantly, interest payments could be calculated using an index comparable to that announced last week by the NY Fed for SOFR; secondly, as the ARRC's preferred methodology for compounded SOFR, it would simplify and facilitate  multi-currency agreements; and it would match the weighting of SONIA rates in other market segments, such as deposits, swaps and repos.
  • EBRD’s extensive work ahead of the transaction was rewarded by a highly impressive orderbook; GBP1.85bn final demand from 60 investors, marking the second largest ever SSA SONIA orderbook. This was an impressive increase vs. the 25 investors involved in EBRD's £800m 5-Year SONIA benchmark last year & included over 20 new investors to EBRD's credit; a clear testament to EBRD's leadership & investor work within this sector.
  • The exceptionally strong demand allowed EBRD to upsize the transaction to GBP750m, whilst also moving the spread 2bps tighter to SONIA+25bps, offering minimal new issue concession versus their outstanding SONIA benchmark curve.

Issue Details

  • Following extensive prior investor work to test investors’ appetite for a movement away from the previously used “Observation Period Lag”, EBRD took advantage of the clear issuance window and lull in high grade GBP supply to announce their inaugural 3-year FRN SONIA benchmark using an “Observation Period Shift” methodology at 8:45am on Tuesday 18th February. Initial-price-thoughts of SONIA+27bps area were also released at this stage.
  • The transaction enjoyed a very strong reception from the outset, with indications of interest above GBP1 billion (incl. £50m JLM) by the time books officially opened on Wednesday morning. Guidance on the transaction was also announced 1bp tighter to SONIA+26bps area at this juncture.
  • Accounts continued to reflect their orders following books opening, and just one hour later, demand was in excess of GBP1.3bn (incl. 50mm JLM). Given the strength of demand already indicated and in order to provide clarity to investors, the syndicate set the spread 1bps tighter than guidance at SONIA+25bps.  
  • Despite the tighter spread revision, the orderbook continued to grow strongly, allowing EBRD to upsize the transaction to GBP750m. Books ultimately closed at 10:30am with final demand in excess of £1.85bn from 60 investors, a clear testament to the extensive work carried out by the issuer in advance of the transaction.
  • In line with SONIA transactions this year, UK investors accounted for the majority of the transaction (84%). In terms of investor type, Banks were the largest constituent, taking 73% of final allocations, while Fund Managers / Pension / Insurance (21%) and CB/OI (6%) took the remainder.

Observation Period Shift” Methodology

  • Thus far, all ~GBP57bn of SONIA issuance launched to date has followed the standard 5 Business Day “Observation Period Lag” methodology.
  • The difference between the Period Shift and Period Lag is in the weighting of the rate that is a specified number of London Banking Days (“LBD”) prior to the Business Day in the Interest Period:
  • The Lag weights the rate according to the number of days that apply in the Interest Period
  • The Shift weights the rate according to the number of days that apply in the Reference/Observation Period
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