SONIA Group reviews market conditions, stablecoin impact
The Bank of England's SONIA Stakeholder Advisory Group reviewed market conditions and discussed the potential impact of HM Treasury's T-bill consultation and stablecoin developments at its 24 March 2026 meeting.
SONIA wedge narrows, T-bill impact debated
The SONIA to Bank Rate wedge narrowed to less than 2 basis points in March, remaining around that level since.
Despite recent geopolitical tensions, market functioning remained orderly with robust trading volumes.
Bank of England staff presented an overview of HM Treasury's consultation on expanding the UK Treasury bill market, focusing on its implications for money markets, the SONIA benchmark, monetary policy implementation, and financial stability.
Market participants expressed a broad range of views, highlighting the importance of the secondary market and demand drivers, while also noting potential constraints on participation in an expanded T-bill market.
Stablecoins and derivative liquidity
The Group discussed stablecoin developments, including their structure, international growth, use cases, and risks, particularly for financial stability and the SONIA benchmark.
While regulatory changes and an expanded UK T-bill market could support stablecoin development, operational challenges remain.
Discussions also covered trends in SONIA exchange-traded derivatives, noting record trading volumes and healthy liquidity despite wider spreads and increased volatility.
Market infrastructure proved resilient during recent events, with larger moves driven by deleveraging and positioning unwinds rather than liquidity concerns.