Nationwide Building Society issued a £650m (Eu786m) three year floating rate covered bond on Monday, and a funding official at the issuer told The Covered Bond Report that the format of the transaction was partly fuelled by a desire to develop the sterling market.

David Wallis, head of funding, Nationwide Building Society, said the transaction had surpassed expectations for size and pricing.

The issuer had set a minimum size of £500m before opening the order books.

“Anything there afterwards pretty much exceeded our expectations,” he said, “so we were pretty much delighted to get £650m.”

Leads HSBC, RBC, RBS and UBS priced the bond at 165bp over Libor, the tight end of guidance of 165bp-170bp.

Wallis said that when the lead managers had the pricing discussion they looked at a number of bonds in sterling and euros until they came up with a broad relationship between Nationwide and Barclays Bank.

Barclays on Friday sold a self-led £750m three year floating rate covered bond at 155bp over Libor, after earlier this month selling its first sterling covered bond, a £1bn fixed rate 10 year issue.

“If you look at us and Barclays we typically price around 10bp-15bp behind them,” said Wallis, “so the fact we finished 10bp back of them we think says positive things about our sterling and euros going forward.”

Wallis said the issuer had been looking at the floating rate sterling market for a few months before launching a deal this week.

“As soon as we got to the point where we were confident the trade worked we moved to execute,” he said.

He said that Nationwide had also looked at the long end in the fixed rate market, but that the pick-up over Gilts was very high.

“I didn’t think we were comfortable with the absolute value either,” he added. “That, along with a general desire to try and develop other parts of the sterling market, led us to think it made sense to go with a short end floater once we were confident the market was genuinely there.”

Wallis added that he was encouraged by the level of real money interest in the trade as evidenced by 48 orders from such accounts.