Toronto-Dominion sold the largest Sonia-linked covered bond from a non-UK bank today (Monday), a £1bn three year FRN issued on the back of £1.3bn of demand, while the euro market took a breather after the second busiest week of the year.

Since Lloyds in September 2018 launched the first transaction from a financial institution to be linked to the Sterling Overnight Index Average (Sonia), the only Sonia-linked covered bond to be launched from outside the UK has been a £750m three year FRN from Australia & New Zealand Banking Group (ANZ) on 11 January.

This morning, leads HSBC, Lloyds, NatWest, Santander and TD went out with guidance of the 50bp area for a benchmark-sized three year Sonia-linked FRN, and saw orders pass £1bn in around an hour and a half. After around two and a half hours, the spread was set at 47bp and the size at £1bn (EUR1.12bn C$1.69bn) on the back of orders above £1.3bn, with books then closing at that amount, including £50m joint lead manager interest.

The size tops ANZ’s £750m and a lead syndicate banker noted that the book built very quickly, “despite it being sterling and a Monday”. He said that once the book topped £1.3bn there was “no fooling around” with any revised guidance, which he said risks deals losing momentum, hence the move from 50bp to 47bp the number.

The level put TD’s deal inside ANZ on a curve-adjusted basis, he added. He saw the pricing as equivalent to 31bp over in US dollars, meaning that it came in the context of where compatriot Bank of Montreal priced a $1.75bn three year US dollar benchmark on Wednesday, at 29bp over, although he said some others saw the level flat to where TD could issue a three year US dollar.

The sterling deal attracted strong demand from bank treasuries and UK accounts, according to the lead banker, who suggested the success of the first Canadian Sonia-linked covered bond could attract TD’s compatriots to the market.

The euro market was meanwhile quiet, after 12 tranches totalling EUR8.75bn last week, which made it the second busiest week of the year, according to Joost Beaumont, senior fixed income strategist at ABN Amro. This took year-to-date euro issuance past EUR90bn and net supply to around EUR36bn.

Bankers said conditions remain accommodating, but a public holiday in parts of Europe on Thursday could curtail activity.