Will Eonia Sink or Swim in Hunt for Euribor Replacement?

The European Central Bank has intervened to rescue stalling benchmark reform and find a new risk-free rate for swaps. But the Eonia rate has seen dwindling transaction volumes in recent years, and while the ECB’s new overnight rate is regarded as the top contender, it may take time for the market to develop confidence in a new reference rate, reports Risk.net’s Chris Davis.

While working groups in other currencies had selected alternative risk-free rates (RFRs) to Libor for swaps contracts and were planning the transition process, hardly any headway appeared to have been made in the Eurozone—the second-largest interest rate swap market in the world. “They’ve wasted a lot of time and achieved precious little,” said a portfolio manager at a pension fund management firm in London. Worse, the number of banks submitting to the Euribor panel had fallen to a level where m

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