Nationwide Building Society priced a twice subscribed £750m (Eu943m) three year floating rate covered bond yesterday (Tuesday), only the fourth new issue in the UK currency this year, with a syndicate official at the leads saying the strength of the response came as a surprise.

BNP Paribas, HSBC, RBC and RBS collected some £1.5bn of orders from 70 accounts for the UK Regulated Covered Bond, and priced it at 23bp over three month Libor, the tight end of guidance of the 25bp over area. Initial price thoughts had been set in the mid to high 20s over.

The deal was yesterday afternoon trading at 19bp/15bp over, according to Jez Walsh, head of covered bond syndicate at RBS, who said the deal surprised to the upside.

“We didn’t expect such a strong response,” he said. “If you had offered me a £1bn order book I would have bitten your hand off, so getting to £1.5bn was pretty surprising.

“And 70 accounts is a big audience for sterling covered bonds.”

A lack of sterling supply and an expectation that interest rates will increase supported the trade, he said, with a strong bank treasury bid and Nationwide being a well-liked credit also contributing to the success of the transaction.

At 23bp over, the deal came with a minimal new issue premium, said Walsh. Comparables used to price Nationwide’s deal included Lloyds Banking Group January and March 2017 issues that were trading at 18bp/13bp over and 20bp/15bp over, respectively, according to Walsh.

A syndicate official said that the 23bp over re-offer spread is equivalent to around 2bp over mid-swaps in euros, adding that this is roughly in line with where Nationwide would come in euros, but that the sterling transaction is more cost efficient for the issuer because it saves on cross-currency swaps.

Yesterday’s deal is the issuer’s second benchmark this year after a Eu1.75bn dual tranche issue in early June. That was Nationwide’s first euro benchmark covered bond since October 2011. It had last tapped the sterling market in January 2012, with a £650m three year floating rate note (FRN) that came at 160bp over three month Libor.

The UK and Ireland took 83% of yesterday’s deal, Asia 6%, Africa and the Middle East 5%, Germany and Austria 4%, and Switzerland 2%.

Fund managers were allocated 46%, banks and private banks 41%, central banks and SSAs 10%.