Lloyds TSB Bank yesterday (Wednesday) priced its first euro benchmark covered bond since March 2011, with the lengthy break probably having helped the issuer sell the deal it wanted, according to officials at the issuer.

The UK bank sold a Eu1.25bn five year Regulated Covered Bond at 180bp over mid-swaps, after setting guidance at the 185bp over area. Leads Barclays Capital, Lloyds, Natixis and UniCredit gathered around Eu1.7bn of orders.

Simon White, head of senior funding at Lloyds Banking Group, told The Covered Bond Report that the issuer is more than happy with the transaction.

“Our main ambition was to get a good regulation benchmark trade out there,” he said. “We were not looking to knock the cover off the ball, and in terms of size hit the top end of what we would have wanted to take out.”

The transaction fulfils a mandate that White said was announced on 20 December in anticipation of heavy supply in January.

“Towards the back end of December it seemed the market was going to open with an improved tone, with every market participant wanting the market to work,” he said. “As an issuer we were aware that investors, in particular real money accounts, would be long cash so that technically the market was always going to open somewhat better.”

Yesterday’s deal is Lloyds’ first euro benchmark covered bond since the end of March and Gary Staines, director, asset backed solutions at Lloyds, said that this lengthy absence from the market probably helped attract investor demand.

“We have a comprehensive curve, but there wasn’t much recent supply from us and that helps,” he said, adding that the bank’s reduced presence in the benchmark market is due to lower wholesale funding requirements.

White said that Lloyds has an overall term wholesale funding requirement of £20bn-£25bn for 2012, of which £15bn-£20bn is for funding from the public markets.

“We made some inroads into that late last year, with the securitisations that we did in November representing prefunding for 2012 and a liability management exercise also bringing down our funding needs for this year,” he said.

Being for a UK issuer, Lloyds’ covered bonds are not eligible for the ECB’s second covered bond purchase programme (CBPP2), but White said that the bank still benefits from the programme, albeit indirectly.

“The programme has helped the market backdrop enormously, by engendering confidence that a bid is there,” he said.

More than 130 accounts participated in the transaction, with good granularity in the order book, according to White.

“You know a trade is a success when there is a very long tail of smaller orders from accounts that are perhaps less well known,” he said.

Lloyds’ transaction is the first UK benchmark covered bond since HM Treasury at the end of November announced that the Financial Services Authority would be mandating loan-level data reporting for Regulated Covered Bond issuers, although the requirements are only due to come into effect at the end of this year.

Staines said that the issuer has already been providing loan level data and has enhanced its investor monthly reports, but that there have not been any requests for loan level information from investors.

“I suspect there will be more interest in this data from US accounts, although it will be interesting to see if there is interest from UK investors in sterling deals,” he said.