Lloyds priced the largest sterling covered bond in two years today (Monday), a £1bn three year FRN that is also the first sterling benchmark from the UK since the launch of the BoE’s Term Funding Scheme (TFS) curbed funding needs, and a £1bn order book was deemed a vote of confidence in UK names.

Lloyds’ new issue is the fifth sterling covered bond to be launched since the UK market opened last Tuesday, but is the first from a UK name since July.

Leads Barclays, Lloyds, Nomura and RBC launched the three year floating rate note with initial price thoughts of the 32bp over three month Libor area this morning, before fixing the spread at 30bp with books at £1bn. The size was later set at £1bn (Eu1.17bn).

The deal is the largest in the sterling covered bond market since January 2015, when Lloyds printed a £1bn January 2018 FRN issue.

“It’s a strong outcome with a very big book for the sterling market,” said a syndicate banker at one of the leads. “It got a lot of interest from UK bank treasuries, who typically want to buy the covered bonds of other UK banks as they get good liquidity and repo treatment for them, relative to international issuers.

“It also helps that sterling covereds from UK issuers have been pretty rare since the launch of the TFS. Lloyds have a couple of big redemptions in the covered bond space in the first quarter and so are happy to maintain investors and issue something even if the levels aren’t as attractive as those available from the Bank of England.”

The new issue is only the second sterling benchmark covered bond from a UK issuer since the Brexit vote in June – following a £500m three year FRN for Santander UK on 1 July – and the first since the Bank of England announced its related Term Funding Scheme in August. The TFS allows banks to borrow reserves in exchange for eligible collateral until at least 28 February 2018.

A banker away from the leads said the demand for the new issue reflected well on investors’ perceptions of UK banks in spite of upcoming Brexit negotiations.

“It’s not surprising that a domestic bank has scored one of the best results we’ve seen in the sterling market recently, especially given the lack of supply,” he said. “But a £1bn book can still be seen as a good vote of confidence for a UK name post-Brexit.”

The deal offered a new issue premium of around 3bp-5bp, according to bankers at and away from the deal, who cited Lloyds January 2019s at 21bp, bid, and July 2019s at 23bp, and Coventry Building Society March 2020s at 30bp.

Lloyd’s new issue is the third sterling benchmark in floating rate format since the opening of the market this year. Canadian Imperial Bank of Commerce launched the first on Tuesday, a five year FRN, before Deutsche Pfandbriefbank (pbb) priced a £250m three year FRN at 55bp over three month Libor on Thursday.

Coventry Building Society sold the first post-Brexit euro benchmark covered bond from the UK on Thursday, a Eu500m seven year that attracted over Eu900m of orders.