Barclays has priced the first UK dollar covered bond in almost a year, a nearly twice subscribed $2bn five year issue that syndicate bankers said was fairly priced and confirmed the positive state of the US covered bond market this year.

Leads Barclays, Citi, HSBC, and UBS are understood to have gathered nearly $4bn of orders for the transaction. They priced the deal yesterday (Wednesday) at 124bp over mid-swaps, following initial price thoughts of 125bp-128bp over.

The last UK dollar covered bond was a $1.25bn three year deal for HSBC at the end of June 2011. Barclays’ transaction brings year-to-date dollar benchmark covered bond supply to $24bn, according to RBS analysts, over 60% of 2011 issuance volumes.

Syndicate bankers away from the leads complimented the deal, noting its “nice size” and fair pricing, with one welcoming the addition of a UK deal to dollar benchmark supply this year.

However, they said that the trade did not represent a surprise to the upside in that it was only to be expected that a UK issuer would be able to successfully tap the market given a positive unfolding of the dollar market so far this year.

“It’s a nice sign,” said one. “2012 deals so far have done well in the secondary market and have been resilient even in the April volatility, so it’s not that surprising to see good uptake for this deal.”

Another said that Barclays’ deal was a good transaction, but that it did not signal a changed market or provide new information about the state of the US market.

“It went exactly as expected,” he said.

A syndicate banker at one of the leads compared yesterday’s primary market activity in dollars with that in euros, and noted that the “supply success” in dollars despite market volatility and macro concerns was “even more impressive”. Besides Barclays, corporates BP and Glaxo raised a combined $8bn in the bond market.

The order book for Barclays’ deal showed that cash rather than relative value is driving demand, said bankers, with global funds remaining on the sidelines “watching the primary pass by and spreads squeeze tighter”.

Syndicate officials away from the Barclays deal said that pricing at 124bp over meant the transaction came flat to the issuer’s euro secondary curve, with one putting a Eu2bn February 2017 issue at around 60bp over.

“It’s in line with where euro levels come out,” he said, “so a diversification trade rather than arbitrage.”

A lead syndicate official also said the pricing was flat to euros, adding that the deal “ticked a lot of boxes”.

A syndicate banker away from the leads noted that much commentary on the dollar covered bond market had suggested that it would offer pricing advantages, but that his had not really materialised.

“It was fair pricing all round,” he said, “for the issuer and investors.”

He said that relative value relationships in euros and dollars were the same, with Scandinavian and UK dollar covered bonds for example trading flat to euros after the basis swap, taking into account bid-offer spreads and daily volatility.

“The market has become efficient,” he said.

Barclays’ last dollar benchmark was a $1bn five year sold in September 2010, and a syndicate official said this was in the low 80s over, with the curve between three and five years worth 30bp. The pricing was therefore fair, he said.