National Australia Bank was out with the first Australian covered bond in sterling this (Thursday) morning, pitching it inside recent supply from UK names. Its three year floating rate sterling covered bond is the third deal this year in that maturity, format and currency.

Leads Barclays, Lloyds and NAB were marketing the transaction at 145bp-150bp over Libor. This compares with pricing of 155bp over for a Barclays Bank self-led £750m (Eu898m) three year floating rate issue sold on Friday, and a re-offer margin of 165bp over for a Nationwide Building Society £650m three year floater on Monday.

NAB’s issue in sterling marks Australian banks’ foray into at least a sixth currency market since they won approval to issue covered bonds in October 2011. Australian banks have now sold covered bonds in US dollars, Australian dollars, euros, Norwegian kroner, Swiss francs, with NAB adding sterling to the list.

“They’re hitting every single bit,” said one banker.

Westpac has mandated Deutsche Bank to carry out a euro covered bond roadshow.

A syndicate official away from the leads said that UK investors have traditionally strongly appreciated Australian credit and that Australian banks have historically been successful in the fixed rate senior unsecured market, with not many other non-UK financials achieving this with the exception of Nordic issuers.

He said that NAB trades around 100bp tighter than Barclays in sterling senior unsecured paper, and around 25bp tighter than Barclays in euro covered bonds.

“So this should be fine at 10bp through where Barclays came,” he said.

Another banker thought that this was “punchy”, adding that rarity value could play a role, while another syndicate official away from the leads said that the level cheap.

“It’s flat to a bit wide of where they would have done a senior unsecured,” he suggested.

Another banker noted that the issue is the first sterling covered bond that is not UCITS eligible and does not comply with the Capital Requirements Directive, and that it will therefore be an interesting test.

However, he said that because the UK’s Financial Services Authority has traditionally not leant toward giving preferential treatment for covered bonds, UK investors may focus on the economics of the deal rather than regulations.

A syndicate official away from the leads said that he did not think the non-UCITS and non-CRD compliance aspect would affect the deal.

“I don’t think it’s a massive issue,” he said. “A lot of investors are keen to diversify risk because it’s a good way for them to get involved in sterling.

“This deal should tick off some taste-buds.”

The UK’s Clydesdale Bank, also a subsidiary of NAB, went on a covered bond roadshow last summer, but has not yet tapped the benchmark markets.

New Zealand’s BNZ, a subsidiary of NAB, has issued a NZ$225m six year mortgage covered bonds, according to a Fitch release. The rating agency today assigned the bonds a triple-A rating.