Australia’s ANZ Banking Group met with good incremental demand for a reverse enquiry-driven £300m minimum three year floating rate covered bond today (Thursday), increasing the deal size to £500m for what is the first benchmark sterling covered bond supply this year.

Leads ANZ, HSBC, Lloyds and RBC had built an order book approaching £600m around half an hour before they were due to close the books, and have fixed the spread at 27bp over Libor, in line with guidance of the 27bp area.

The deal is ANZ’s first public sterling covered bond, according to a syndicate banker at one of the leads.

Another lead syndicate official said that the pricing was aggressive, and that the deal was driven by reverse enquiry but bolstered by large incremental demand. The number of orders was in the mid-30s, he said.

He also said that the deal was a diversification trade for the issuer and that the leads did not reference euro or US dollar levels as this was not deemed relevant from a relative value perspective.

The primary market in sterling covered bonds was quite active in the first half of last year, with supply typically split between short dated floating rate notes and long dated fixed rate deals. However, volumes tailed off after the introduction of a UK government Funding for Lending Scheme, which has offered UK financial institutions cheaper funding than market rates.