Lloyds sold a rare dollar covered bond from the UK today (Monday), a $750m three year Reg S deal, while Bank of Nova Scotia tapped a sterling floater for £350m and building societies Coventry and Yorkshire mandated Sonia trades. DZ Hyp is due tomorrow with its first post-merger euro benchmark.

Lloyds’ new issue is the first benchmark US dollar trade from a UK bank since 2012, when Barclays sold a $2bn five year 144A deal.

The UK issuer approached the market this morning via leads HSBC, Lloyds, RBC and TD, going out with a benchmark-sized three year Reg S deal at guidance of the 32bp over mid-swaps area.

A syndicate banker at one of the leads said that, given the lack of comparable UK supply, recent three year dollar deals of $1.7bn for RBC and $2bn for TD provided some pricing guidance – the two deals came at mid-swaps plus 25bp in mid-October and were trading around that level today – while 32bp over was roughly equivalent to where Lloyds trades in euros.

The pricing was set at 32bp over on the back of almost $900m of orders after three and a half hours of bookbuilding, and the deal sized at $750m (EUR658m, £578m) – the upper end of sizes for Reg S dollar trades, which have typically been around $600m from German issuers, reflecting Lloyds’ larger size, the lead syndicate banker noted.

He said the pricing was arguably inside what Lloyds would have achieved in euros, given the premium that would have been required over its curve for a new issue.

“It’s an encouraging sign to have seen two Canadians and now Lloyds in US dollars lately, albeit in different formats,” he said. “For them to have taken out the kind of sizes that they did at levels that are competitive or consistent on a global basis, that does suggest there is a suitably deep pool of investors here to make a market now and absorb further supply.”

DZ Hyp is expected tomorrow (Tuesday) after an announcement today for its first benchmark covered bond since it was formed from the merger of DG Hyp and WL Bank on 1 August. The issuer held domestic and international meetings earlier in the autumn to inform investors about the new set-up.

Commerzbank, Crédit Agricole, DekaBank, DZ, Helaba and ING have been mandated for the seven year mortgage Pfandbrief. DZ Hyp June 2024s and February 2026s were both quoted at minus 12bp on an i-spread basis in comparables circulated by the leads today, while more recent Pfandbriefe were quoted wider, with Berlin Hyp October 2025s at minus 6bp, ING DiBa October 2023s at minus 7bp, and MünchenerHyp December 2023s at minus 8.5bp.

A syndicate banker at one of the leads said that market conditions in euro covered bonds appeared stable at the start of the week, if uninspiring.

“It feels like we are close to the market getting ready for year-end,” he said. “But it’s still receptive and there is enough spare cash available to give a deal like this a good chance to find a home.”

In sterling, Bank of Nova Scotia tapped a £200m September 2021 floating rate note for £350m (EUR399m, C$595m) at 30bp over Libor.

A syndicate banker at one of the leads noted that BNS had a £400m FRN mature in August and a second £400m FRN is maturing in January. The Canadian bank sold a £500m three year fixed rated deal in January and he said that BNS has been “a very well-liked name” in the sterling market.

The deal was sized at £350m after a minimum £100m tap had been announced, taking the bond to £550m, helping LCR eligibility, the banker noted. He said that the deal could have been priced inside 30bp, but that the issuer chose not to move tighter, noting that the level was “still pretty attractive” versus US dollars.

Coventry Building Society and Yorkshire Building Society have both mandated five year Sonia-linked FRNs, the former to Barclays, Natixis and Lloyds, and the latter to HSBC, Natwest, Santander and TD.

A syndicate banker said that after Lloyds and Santander UK had followed inaugural supranational issuance and deepened the Sonia-linked market with three year covered bonds, it was a natural progression to now see smaller issuers enter the sector, while the five year maturities would take the FRNs beyond the end of Libor in 2021.