A rare euro covered bond for Lloyds Bank yesterday (Wednesday), a Eu1bn seven year, shows that the market prices the UK issuer “in line with ‘best in class’ European issues” and was supported by high quality accounts that bring credibility to the trade, a treasury official at the bank told The CBR.

Leads Citi, ING, Lloyds, Natixis and UniCredit priced the deal, the first euro benchmark covered bond from a UK issuer this year, at 15bp over mid-swaps on the back of more than Eu2.5bn of orders. More than 130 accounts participated in the transaction, which was this (Thursday) morning said to be trading at around 13bp over bid.

Peter Green, senior manager, GCT funding team at Lloyds Bank, said that the breadth and depth of investor interest in the deal was pleasing, as was the final pricing.

“The Lloyds Group has been through a period of transformation in terms of balance sheet and funding structure, and the outcome of this transaction reinforces the progress that the group has made,” he told The Covered Bond Report.

He noted that the deal is the third tightest seven year euro covered bond this year away from German Pfandbriefe, coming behind a Eu1.25bn for Credit Suisse at 13bp over in January and a Eu1bn at 14bp over for Finland’s OP Mortgage Bank.

“We’ve seen a change in the peer group that the market prices Lloyds in line with,” said Green. “The covered bond deal repositions the group in markets that we have been absent from, and is further verification of how far the perception of Lloyds’ credit has come.

“The market now prices Lloyds in line with ‘best in class’ European issues. We’re very focused on our position in that peer group and it’s not something we take for granted.”

Lloyds’ deal is only the second euro benchmark covered bond from a UK issuer since February 2012. The last time Lloyds had tapped the euro covered bond market was in January 2012, with a Eu1.25bn five year that was priced at 180bp over. It reopened the senior unsecured euro market for UK issuers in October last year, and did the same for the sterling covered bond market in January this year, selling a £1bn (Eu1.20bn) three year floating rate note.

Green said that Lloyds had modest funding requirements for 2014 and that a euro covered bond was part of its “ongoing prudent management of that”.

“The timing suited us from a reporting and programme availability perspective,” he said. “A number of issuers are in blackout ahead of their Q1 results so we had a fairly clear run before we go into blackout later this month.”

Lloyds announces first quarter results on 1 May.

Green said that Lloyds’ euro covered bond was supported by large orders from bank treasuries, but also highlighted as pleasing sponsorship by Asian and central bank accounts, and the involvement of other investors to make for a granular mix.

“It’s very good to see we are reaping the rewards of our investor relation efforts in terms of the participation by high quality accounts that bring credibility to the trade,” he said.

Germany and Austria took 35%, the Nordic area 20%, Asia 16%, the UK 10%, and other Europe the remainder. Banks bought 53%, fund managers and insurance companies 29%, central banks 17%, and others 1%.