A £500m five year FRN for Toronto-Dominion impressed today after matching the spread of recent domestic sterling supply and pricing inside a similar deal for Bank of Nova Scotia. The £800m plus demand for the deal, coming after heavy sterling supply, was seen as good news for the market.

The sterling covered bond market got off to a fast start this year, with £4.2bn of supply prior to TD’s deal, although the last came on 11 January. All but one of the five deals launched before today were also five year FRNs, and bankers said the solid demand for TD’s new issue reflected positively on the development of the sterling market.

“It used to be historically that you’d have a couple of this kind of sterling deal and then the third would do poorly,” said a syndicate banker. “This is now the fifth five year FRN we’ve had this month and they’ve all gone well, which is clearly good news.”

Leads HSBC, Lloyds, NatWest and TD launched the deal with initial price thoughts of the three month Libor plus 27bp area this morning. The leads announced after around one hour and 40 minutes that they had taken £650m of orders, and ultimately fixed the spread at 22bp and the size at £500m (EUR566m, C$865m) on the back of more than £800m of orders, including £50m JLM interest.

The deal was priced 1bp inside the only other sterling covered bond from Canada since the turn of the year, a £550m five year FRN for Bank of Nova Scotia on 3 January, and matched the spread of a £1.25bn five year FRN for Barclays on 2 January and a £650m five year FRN for Stadshypotek on 4 January.

Bankers said it was a good achievement for TD to have priced at the same level as the UK and Swedish issuers. They noted that TD’s covered bonds trade slightly inside those of BNS across the curve.

“The sterling market is a very attractive option for a range of issuers right now,” added one, “with tight spreads available and a good funding advantage versus other markets.”

A syndicate banker away from the leads said the deal offered TD a saving of around 6bp versus an equivalent euro trade, estimating that the final spread was equivalent to around minus 11bp in euros and noting that CIBC last Wednesday priced a EUR1.25bn five year covered bond at 5bp through mid-swaps.