Santander UK was able to take size with a £1bn three year FRN covered bond today (Friday) while paying a slim premium relative to other markets, following a Nationwide £1bn five year that benefited from its rarity. SpareBank 1 Boligkreditt could follow with a five year sterling issue next week.

Leads RBC, Santander and TD launched Santander UK’s deal with guidance of the 25bp over three month Libor area this morning. The spread was set at 22bp before the size was fixed at £1bn (EUR1.14bn), with the book peaking at £1.5bn.

“It’s a good result,” said a syndicate banker at one of the leads. “Getting a £1.5bn book for a three year floater, on payroll Friday and during the Easter period is a strong outcome.

“It’s clear there’s still decent liquidity and appetite for this format.”

The lead syndicate banker said the deal paid a new issue premium of around 2bp, seeing Santander UK May 2020s at around 16bp and November 2022s at around 24bp.

“That’s a pretty modest new issue premium compared to what other asset classes are requiring, particularly for the type of size Santander has been able to take out on this occasion,” he added.

The deal comes after Nationwide Building Society printed a £1bn five year FRN yesterday (Thursday). Leads Credit Suisse, NatWest and RBC priced that deal at 26bp over three month Libor, down from guidance of the high 20s area, with books over £1.1bn, including £85m joint lead manager interest.

“It’s interesting to see the difference in spread for today’s three year note compared to yesterday’s five year note,” said a syndicate banker. “However, Nationwide is a bit of a different animal in that this was their first sterling transaction in two years and they have about £750m outstanding compared to over £3bn or more for the other major banks.

“That makes a difference in terms of investors’ willingness to put liquidity to work in that name relative to the issuers that have been more prevalent. People will buy Nationwide at a level tighter than others given lack of exposure to the name.”

Santander UK’s last sizeable sterling issue was a £500m five year FRN in November, while Nationwide’s new issue was its first in the sterling market since April 2016.

SpareBank 1 Boligkreditt has announced a mandate for investor meetings on Monday ahead of a five year sterling issue that could be fixed or floating rate. A syndicate banker at one of leads Credit Suisse, NatWest and RBC said the deal will follow next week, subject to market conditions.

The deal will be the Norwegian issuer’s second sizeable sterling-denominated covered bond, following an inaugural £500m five year FRN in November, which was priced at 27bp over three month Libor.