Lloyds Bank attracted over EUR1.7bn of orders to a positive-yielding EUR750m 10 year benchmark covered bond today (Monday) in the “eye of the storm” for UK risk, while DZ Hyp and NN Bank are among other issuers set to follow in the wake of the announcement of renewed ECB stimulus on Thursday.

Leads LBBW, Lloyds, Santander, UBS and UniCredit went out with guidance of the mid-swaps plus 32bp area for Lloyds’ euro benchmark-sized 10 year transaction this morning. An hour and a half later the leads reported books above EUR1bn, excluding joint lead manager interest, and after about two and a quarter hours the spread was fixed at 28bp over and the size at EUR750m on the back of around EUR1.5bn of orders, excluding JLMs. The book ultimately totaled over EUR1.7bn.

“It went very well,” said a syndicate banker at one of the leads. “It was textbook execution and we were very happy.

“We had a decent EUR1bn-plus order update, gained further momentum, and the book was in good shape, which allowed us some revision on pricing.”

He put fair value in the low 20s. According to pre-announcement comparables circulated by the leads, Lloyds’ March 2025s were quoted at 14bp over, mid, and its June 2026s at 19bp over. Nationwide June 2029 paper was also quoted at 15bp over and its June 2032s at 20bp over.

“Bearing in mind Brexit headlines, there was probably a little bit extra given to compensate investors,” said the lead banker, “but apart from this, the new issue concession was well in line with what we’d observed on other trades.”

A syndicate banker away from the leads saw fair value at around 24bp and said the transaction was “pretty impressive and executed sharply”.

“The ability to execute a 10 year euro UK issue is not something one can take for granted at the best of times, let alone in the current backdrop, so it’s quite a bold move on their part,” he added, “although it feels a little bit like we’re in the eye of the storm for UK risk at the moment, so I’m not surprised to see Lloyds react swiftly to that.”

The lead banker said that although sentiment toward the UK covered market had not deteriorated outright in the wake of dramatic moves in domestic politics, investors are exercising more caution.

“The combination of being a UK issue and a 10 year tenor was a touch too long for some buyers,” he acknowledged, “so I cannot fully say that the investor base was as open and receptive to this like for any other core European trade, or when Lloyds were in the market earlier this year.”

In March, Lloyds attracted EUR4.7bn of demand to a EUR1.5bn five year benchmark.

The lead banker said that it was nevertheless encouraging to see a UK name moving first after the ECB meeting last Thursday and achieving “a very decent outcome”.

A syndicate banker away from the leads said that given the negative-yielding environment of late, Lloyds’ positive yield, of 0.245%, presented an attractive re-entry point for investors. Only one other positive-yielding euro benchmark has been launched since the summer holiday season, a EUR500m 10 year from MMB SCF last Monday (9 September), which yielded 0.11%.

“Clearly investors are pleased to see positive yields emerge and are taking advantage of the meaningful back-up in rates that we saw last week following the ECB’s meeting last week,” said the syndicate banker.

“In the context of deals today, there’s not an awful lot out there in the 10 year part of the curve,” he added. “I was also surprised they didn’t take more than EUR750m as they had the option of going slightly larger in size.”

The lead banker said a EUR1bn trade was “clearly on the table”, but that the EUR750m size suited the issuer’s needs.

The UK’s Virgin Money remains in the pipeline after having conducted a roadshow for a debut euro benchmark via BNP Paribas, HSBC, Natixis, NordLB and UniCredit.

DZ Hyp is set to launch a long seven year benchmark mortgage Pfandbrief tomorrow (Tuesday), with Commerzbank, Crédit Agricole, DekaBank, DZ, HSBC and NatWest announced as leads today.

“This should be a pretty standard transaction and we hope for a smooth execution tomorrow,” said a syndicate banker at one of the leads.

“LBBW’s nine year went well the other day and this is of an almost comparable tenor so it should do just as well.”

DZ Hyp August 2026, September 2026 and April 2027 was all quoted at minus 4bp, mid, according to pre-announcement comparables circulated by the leads. LBBW’s EUR650m no-grow nine year public sector Pfandbrief was priced at 1bp over mid-swaps last Monday.

Nationale-Nederlanden Bank (NN Bank) announced a mandate for a EUR500m no-grow 10 year covered bond that ABN Amro, BNP Paribas, DZ, HSBC and LBBW are expected to launch tomorrow. NN Bank September 2028s were quoted at 17bp by the leads.

A syndicate banker said a further new issue could also hit the euro covered bond market.

“We’re not seeing a full rush of covered bond issuers throwing themselves into the market yet,” said a syndicate banker. “But we’ve seen these two announcements today so some have been looking, and more will materialize amid these conditions.”