Bank of Nova Scotia sold an oversubscribed £400m (Eu545m, C$823m) three year FRN today (Thursday), but a banker away from the deal said demand for sterling paper appeared to be falling, suggesting further supply in the currency might be unlikely in spite of favourable swap levels.

Bank of Nova Scotia’s deal is the third sterling covered bond to hit the market this week, all of them having been three year floating rate notes, following a £750m market reopener from Lloyds on Tuesday and a £400m issue for Nordea Eiendomskreditt yesterday (Wednesday).

Leads Barclays, Deutsche, Goldman Sachs and Scotiabank priced the BNS £400m floating rate note at 45bp over three month Libor, in the middle of initial price thoughts and guidance, after building a final order book of over £400m.

“All in all it’s a decent result, most importantly getting a decent size done,” said a syndicate official at one of the leads.

The lead syndicate official said the deal offered a new issue premium of around 7bp, seeing Bank of Nova Scotia August 2018s at 32bp and three year sterling paper from other Canadian issuers also in the low 30s.

A syndicate official away from the leads said the price looked disappointing compared to the week’s other trades, after Lloyds’ deal was priced at 37bp over three month Libor and Nordea’s at 42bp.

“The spread is I think wider than they would have hoped for,” said a syndicate official away from the leads. “It is a little odd that you have Bank of Nova Scotia coming wider than Nordea, but I think that is mainly a function of the market being rather weaker today.”

The syndicate official said it is now unclear whether more issuers will tap the sterling market as demand appears to be decreasing, although sterling levels remain attractive for issuers.

“We are seeing a law of diminishing returns, with Lloyds building a £850m book, Nordea £425m and now Bank of Nova Scotia £400m,” he said. “If you plot that out, then the next deal probably doesn’t go so great.

“However, there is one caveat for that, in that other issuers that were not considering covered bonds might do so, now that other markets not looking so good.”

Bank of Nova Scotia printed one benchmark sterling covered bond last year, a £400m three year in July.