World Bank prices its first Sterling Overnight Index Average bond

The bond responds to investor demand for SONIA assets and follows the World Bank’s first Secured Overnight Financing Rate (SOFR) bond last month.

The World Bank (International Bank for Reconstruction and Development, IBRD, Aaa/AAA) today priced its first Sterling Overnight Index Average (SONIA) bond. The GBP 1.25 billion, a five-year benchmark is the largest in this market. With this bond, IBRD becomes the first issuer in two LIBOR alternative reference rates.

The bond responds to investor demand for SONIA assets and follows the World Bank's first Secured Overnight Financing Rate (SOFR) bond last month. Both issuances reflect the World Bank's commitment to supporting the developing of a market for LIBOR alternatives and offering investors high quality, liquid assets in those markets.

The high-quality order book of 40 investors was mostly based in the UK. Order books were opened for indications of interest on September 26 at 8 am London time, with an initial price guidance at SONIA +25 basis points. When the books formally opened on September 27 at 8 am London time, there were over GBP 850 million in indications of interest. Within a few hours, and even with a revised price guidance to SONIA +24 basis points, demand grew to GBP 1.45 billion. Order books closed at 11:30 am London time, with the spread set at +24 basis points.

Arunma Oteh, World Bank Vice President and Treasurer, said: "We are very pleased to have priced the largest ever SONIA-linked bond. Today's transaction is an important step in developing robust alternatives to LIBOR. We have a proud history of innovation supporting market developments and we appreciate the collaboration with our financial partners and investors who are joining forces with us to develop the SONIA market."

John-Lee Tin, Managing Director, Head of SSA DCM and MTN, JP Morgan said: "With this jumbo SONIA GBP trade, the World Bank adds to its storied history of pioneering in the international capital markets. As a party to the first ever interest-rate swap, it makes complete sense to see this development institution taking a lead role in the introduction of a new floating rate benchmark, and judging by the strong investor reception, the market fully endorses the World Bank's effort to establish liquidity in the new reference rate."

Damien Carde, Managing Director, Head of Frequent Borrower Group DCM, NatWest Markets said: "With this trade, the World Bank brings new depth and liquidity to the SONIA market. This landmark transaction represents the largest size to-date done in SONIA format and also represents the World Bank's joint largest benchmark trade in sterling. This transaction will serve to pave a clearer path for the rapidly developing SONIA bond market and is a testament to the ingenuity of the World Bank's funding team."

Kerr Finlayson, Director, Head of SSA Syndicate, RBC Capital Markets said: "World Bank's record-setting benchmark is the best endorsement the SONIA market could have hoped for, demonstrating further acceptance of this product globally. When a transaction like this looks so successful on all fronts it just once again reaffirms World Bank's key role in the development of new markets and it can only serve as the catalyst for the internationalization of SONIA. It goes without saying that it was a true honor to be involved at RBC."