Lloyds printed a £1bn five year FRN covered bond today (Tuesday) that, while demonstrating a widening in spreads on sterling new issues since the turn of the year, showed the market’s strength versus other asset classes, paying a premium many times smaller than recent senior trades.

Lloyds Bank leads HSBC, Lloyds, RBC and TD launched the five year Lloyds FRN with guidance of the three month Libor plus 27bp area this morning. The deal was priced at 25bp with books over £900m, and the size was subsequently set at £1bn (EUR1.14bn) with the final book in excess of £1bn, excluding joint lead manager interest.

“It’s a good result, that demonstrates strong ongoing support for UK covereds,” said a syndicate banker at one of the leads.

The lead syndicate banker said the 25bp spread represented a 2bp new issue premium versus the issuer’s curve. He noted that the spreads now available in the primary sterling covered bond market are slightly wider than at the end of last year, when five year FRNs from domestic issuers were priced at 23bp-24bp, but said this represented a relatively small move compared to other asset classes.

“In sterling senior, issuers are currently offering 25bp concessions and not getting very much done,” he said.

The new issue is Lloyds’ third benchmark covered bond of the year, following a £1.25bn three year FRN on 3 January – priced at 16bp over three month Libor – and a EUR1bn seven year issue on Thursday.