The UK’s Co-operative Bank launched the only new covered bond benchmark of the week today (Friday), a £1bn 10 year transaction in the sterling market, the first benchmark in the currency for six months.

Leads Barclays, HSBC, JP Morgan, RBS and UBS closed books after two hours, at 1200 London time, after having built a book of over £1bn. Pricing was set at the tight end of the guidance, of 250bp-260bp over Gilts.

A syndicate official at one of the leads said they set initial guidance based on other UK comparables, citing an Abbey April 2021 trading at 212bp/192bp, for example. He said a new Abbey 10 year would probably include a new issue premium of 15bp, and would come at around 240bp over.

He added that the transaction had gone “very well”. After the first hour of bookbuilding on the transaction, the order book had been in excess of £600m.

“In one hour £600m is very impressive,” said a syndicate official away from the leads. “The fact that it’s not a euro-zone issuer is a good thing.

“This is probably the only thing that could work today given the uncertainty in the euro-zone.”

The issuer held a European roadshow ahead of the transaction, with some market participants having expected a euro deal.

The lead syndicate official said the trade was almost entirely bought by domestic investors.

The transaction is the first sterling covered bond benchmark since April, when Coventry Building Society launched a £750m seven year deal.