FRED has 13 new series of overnight interest rate data from the Bank of England. Banks pay the sterling overnight index average (SONIA) on top of any loans made for purchases of sterling (British pounds) in the overnight market. Because SONIA is based on the average of these overnight interest rates without incorporating risk premiums, it is also effectively risk free. This is a departure from the London interbank offered rate (LIBOR), which is still short-term lending but more forward looking; since LIBOR includes loans up to one year in duration, risk premiums are built into some of its loans. LIBOR historically has been used by the private sector as a benchmark for short-term interest rates; but as the Bank of England phases out LIBOR this year, SONIA will take its place as a more robust and stable benchmark.
