The Sterling Overnight Index Average (SONIA) rate is an interest rate benchmark used in the United Kingdom. It is the effective overnight interest rate paid by banks for unsecured transactions in the British sterling market and is the Risk free rate of interest.
The market does complete its expectation of future fixings for 3-month compounded SONIA and this is a useful guide, shown in the graph below.
So what's the market predicting over the net 10 years currently, as at 18th August 2023?:
- just over 6% by January 2024 (about this time 2 months ago it was predicting 5.8%)
- we won't be under 5% until August 2025
- not under 4% until August 2028
The effect of this forecast is that the days of cheap cash are behind us and we can expect to see asset price adjustments beginning to happen - be careful out there!