Lloyds opened the sterling covered bond market for the year today (Tuesday) with a £750m three year FRN that was seen as offering attractive funding compared to euro levels. Nordea is expected to launch a three year sterling floater tomorrow, having announced a mandate today.

After announcing Lloyds’ deal yesterday (Monday), leads Barclays, HSBC, Lloyds and RBC priced the £750m (Eu1.02bn) three year FRN at 37bp over three month Libor, after having announced the deal with IPTs of the high 30s. Books were in excess of £600m at the last update, with the final size of the order book not disclosed when The CBR went to press.

“That spread is spot on, and right where they should be pricing,” said a syndicate official away from the leads. “Furthermore, I think £750m is a decent result if the books are indeed oversubscribed, bearing in mind that the sterling market is not what it used to be, with many of the big sterling investors and bank treasuries now out of the market.”

The syndicate official estimated that an equivalent euro trade from Lloyds would probably be priced at plus 10bp, which he said worked out at around 47bp in sterling.

Lloyds sold two sterling benchmark covered bonds in 2015, a £1bn three year FRN in January and a £500m seven year fixed rate issue in March. The last sizable sterling covered bond was a £250m (Eu339m, Skr3.1bn) three year issue for SEB on 12 November.

Nordea today announced a mandate for a three year sterling FRN that is expected tomorrow, with leads Barclays, RBC and RBS.

Syndicate officials said they expect other issuers to tap the sterling covered bond market this week, with euros set to be quiet tomorrow (Wednesday) as Germany and other European countries are closed for public holidays.