Abbey National Treasury Services is pricing a £1.25bn 10 year covered bond at 145bp over Gilts today (Thursday) that demonstrated the advantages UK issuers can gain by issuing domestically. Meanwhile the euro primary market was quiet, after Barclays and CFF deals yesterday, ahead of an ECB rate decision.

“Everybody is looking at the ECB and what they’re going to do,” said one syndicate official. “We had always envisaged this as being a three day week.”

However, bankers said that the impact of Portugal finally officially seeking a bail-out was muted.

“The market is doing OK,” said another syndicate official. “The message about Portugal yesterday was something already anticipated by market participants, although I had thought that once the words were spoken out loud there would have been more volatility.”

And after a hiatus at the end of the week, more activity is expected next.

Santander offices, London

Barclays Capital, BNP Paribas, Santander and UBS opened books on Abbey’s 10 year benchmark with guidance of the 145bp-150bp over Gilts, and are pricing the issue at the tight end of the range. A syndicate official away from the leads said that the pricing was in line with where he had expected Abbey to come and showed how the sterling market could benefit UK issuers greatly.

“It’s an incredible development,” he said. “Abbey trades quite wide in euros as they have been artificially blighted by Santander – although less so than in the past – and I put this 33bp inside what Abbey could achieve in euros in really a best case scenario.”

He said that the tightest Abbey could achieve on a 10 year euro would be 155bp over mid-swaps. The new sterling deal came at the equivalent of 126bp over mid-swaps, which would translate to 122bp in euros. He estimated that a £750m seven year Yorkshire Building Society deal on Tuesday had saved the issuer about 20bp.

The level at which Abbey could issue in sterling was helped by the performance of a 15 year issue it launched in February. That has tightened from 158bp over Gilts to 126bp/123bp, equivalent to 123bp/120bp over mid-swaps.

Barclays Bank wrapped up a Eu1.5bn five year benchmark yesterday (Wednesday), after around 125 accounts placed over Eu3.5bn of orders. The UK bank priced its issue at the tight end of guidance, at 58bp over mid-swaps.

The deal was launched without any pre-sounding, according to a syndicate official at one of the leads, which were Barclays Capital, Citi, Commerzbank, Crédit Agricole, ING and Société Générale.

“We didn’t feel the need for a whisper,” he said. “Barclays has a pretty liquid curve and we were confident with the initial 60bp area level at which books were opened.

“The books then grew very rapidly when they were opened just after 0800 London time. They were closed at 0930 and at that point the book was above Eu3.5bn.”

In the meantime guidance had been revised to the 58bp-60bp range.

“Pretty much everyone moved to 58bp,” said the syndicate official, “so we printed it at that level and it traded a couple tighter on the break.”

He said that the book would have supported a deal of more than Eu1.5bn, but that the issuer had not wished to do more.

The UK took 27% of the bonds, Germany 23%, Asia 14%, Scandinavia 10%, France 8%, the Benelux 5%, eastern Europe 4%, Italy 2%, Switzerland 2%, the US 1%, and others 2%. Banks were allocated 47%, asset managers 24%, central banks 18%, insurance companies 9%, and others 2%.

Compagnie de Financement Foncier priced a Eu1bn 10 year obligations foncières benchmark at 78bp over mid-swaps, despite some suggestions that the pricing was too ambitious. Guidance was the high 70s over mid-swaps, and several bankers said that a level of 80bp or more would have been more appropriate.

“Another 5bp or so would have made all the difference,” said one banker away from the leads. “We had their outstanding 2021s at around 74bp mid.”

A syndicate official at one of the leads acknowledged that some accounts had pushed back on the pricing and that it had been a slow but steady process, but said that the it had come to a successful conclusion.

“It was not a cheap deal,” he said, “but I wouldn’t call it rich, either.”

More than 40 accounts placed orders of over Eu1bn. France was allocated 39%, Germany and Austria 38%, the UK 10%, Asia 5%, Italy 3%, the Benelux 3%, northern Europe 1%, and central Europe 1%. Banks took 58%, asset managers 21%, central banks and official institutions 7%, and insurance companies and pension funds 14%.