Lloyds issued a £1.25bn (Eu1.5bn) 13 year fixed rate covered bond today (Friday) after three sterling FRNs in the preceding five days, at the end of a week in which benchmark euro covered bond supply was beaten by four other currencies and in which euro area supply was absent.

Lloyds priced its transaction at 270bp over Gilts after leads BNP Paribas, Lloyds, RBS, Santander and UBS had set initial guidance of the 275bp over Gilts area and then revised guidance to 270bp-275bp over.

A syndicate official away from the leads said the pricing was fair based on a Barclays January 2022 trading at 213bp/205bp and a Lloyds December 2024 at 260bp/240bp. Royal Bank of Scotland sold a £1bn 12 year at 275bp over Gilts last week, which was trading at 260/240 today.

Another banker suggested the pricing was cheap, and noted that as soon as the deal was announced, spreads widened on outstanding sterling transactions.

“As soon as Lloyds announced, you saw the spreads widen about 10bp-15bp,” he said. “I think the fear was that investors would switch out of other issues and into Lloyds, but now the spreads are back down to only about 3bp-5bp wider.”

Another syndicate official away from the leads said the market had reacted to the new announcement as expected, but he had heard of only one account switching into the Lloyds deal.

Orders are understood to have been in excess of £1.5bn by 1100 London time, and £2.25bn at the time books were closed. A syndicate official away from the leads said the Lloyds transaction was very strong.

“It compares very favourably with the RBS transaction,” he said, adding that all recent sterling deals had gone well.

“With regards to maturity, anything in the 10 year plus bucket means a pretty captive bid.”

National Australia Bank sold a £500m three year sterling floating rate covered bond at 145bp over Libor yesterday. Leads Barclays, Lloyds and NAB priced the deal at the tight end of guidance of 145bp-150bp over.

“It went very well,” said a syndicate official at one of the leads. “It was in line with expectations.”

He noted the deal had priced 10bp inside a Barclays Bank self-led £750m three year floating rate issue sold on Friday at 155bp over and 20bp inside a Nationwide Building Society £650m three year floater on Monday.

A syndicate official away from the leads called the deal “a good trade”.

With only Norway’s Terra BoligKreditt having sold a euro benchmark this week, a Eu500m deal, supply in sterling, US dollars, Swiss francs and Australian dollars all trumped issuance in the asset class’s traditional home currency.

“We’ve seen quite an attractive mix of dollars and sterling this week,” said a syndicate official.

Another banker noted how, in contrast, it was quiet in euros.

“I don’t see anything planned for next week either,” he said of euro issuance.

Furthermore, none of this supply was from euro-area banks.

Westpac is expected to launch its first Australian dollar covered bond in the near future, after Commonwealth Bank of Australia this week launched the first such deal, a A$3.5bn issue.

A funding official at Bank of New Zealand told The Covered Bond Report that a NZ$225m (Eu140m) six year covered bond that settled yesterday was privately placed. The issuer postponed a five year euro issue on Tuesday. Asked to comment on the timing of the local private placement, the BNZ official said that “from a timing perspective the domestic deal coincided with other funding initiatives”. He said that the issue’s pricing is not being disclosed.