Lloyds achieved the tightest spread for a UK euro benchmark since September 2007 as it priced the first from a UK issuer this year, and the bank’s first since 2012, today (Wednesday). Meanwhile, France’s Caffil tapped an October 2028 issue for Eu500m.

Lloyds headquarters, London

Leads Citi, ING, Lloyds, Natixis and UniCredit collected more than Eu2.5bn of orders for the Lloyds deal, a Eu1bn no-grow seven year. Initial price thoughts (IPTs) were set at mid-swaps plus high teens, before the leads revised the spread and set guidance at 17bp over mid-swaps, after having gathered indications of interest in excess of Eu1.7bn. The spread was then fixed at 15bp over.

“When we tightened the spread there was very little sensitivity from investors,” said a syndicate official at one of the leads.

He added that the deal had been well received with “strong take-up” from investors “across the board”, which he said allowed the bank to price the tightest UK euro benchmark since September 2007, when Nationwide priced a five year benchmark at 15bp over.

The syndicate official said the pricing reflected virtually no new issue premium, or 1bp at most.

“The deal has gone extremely well,” he added. “There has definitely been a lack of supply from the UK in terms of euro issuance, and this has fed through into the order book size.”

Syndicate officials away from the leads were positive about the deal, with one stating that Lloyds was a rare name to the euro benchmark space, and as such had been able to “avoid putting too much on the table in terms of concession” on the basis of a Lloyds July 2021, trading at 15bp over.

A banker said that the level achieved was impressive, as the UK bank had managed to price at a level in line with spreads Nordic issuers would be attaining. He highlighted a Eu1bn seven year from OP Mortgage Bank, priced at 14bp over, and a Länsförsäkringar Hypotek Eu500m seven year, priced at 16bp over, as comparables.

The last euro benchmark from a UK issuer was a Eu1bn seven year issued by Abbey National in November, priced at 21bp over. Lloyds last issued a euro benchmark in January 2012, a Eu1.25bn five year, priced as 180bp over.

Italian issuer Banca Monte dei Paschi di Siena mandated Commerzbank, Goldman Sachs, MPS, RBS and Société Générale to lead manage its first euro benchmark covered bond since March 2011 (see separate article here).

A syndicate official on the deal said that he expects it to be tomorrow’s (Thursday’s) business.

Meanwhile, Caisse Française de Financement Local (Caffil) tapped a Eu500m 15 year public sector-backed covered bond, which was issued on 25 September 2013, for a further Eu500m.

Natixis and Société Générale were the lead managers for the increase, setting the re-offer spread at 37bp over on the back of a Eu750m order book, having gone out with IPTs of 39bp over before tightening the spread and setting guidance at 38bp over. The original issue was priced at 50bp over.