Lloyds issued the tightest ever Sonia-linked covered bond today (Monday), attracting over £1.8bn of orders at plus 37bp to a £1bn three year FRN that follows a spate of five year supply. CRH is set to sell the first euro benchmark of the week tomorrow, an eight and 15 year dual-tranche deal.

This morning, Lloyds Bank leads Barclays, HSBC, Lloyds and RBC went out with guidance of the Sonia plus 40bp area for the sterling benchmark-sized three year Sonia FRN. After around an hour, books were reported as being over £1bn, excluding joint lead manager interest, and after around two hours and 15 minutes, the spread was set at 37bp and the size at £1bn (€1.19bn), on the back of over £1.8bn of demand, excluding JLM interest.

A syndicate banker at one of the leads said the issuer opted for a three year maturity in order to diversify away from a recent spate of five year sterling benchmarks – RBC having launched the fifth on Thursday – as well as it being cheaper funding.

“The book built with pace,” he said. “We were over a yard in under an hour, then at £1.8bn we set the size at £1bn and the spread at plus 37bp, which is the world record for the tightest Sonia covered bond.”

He said the deal had performed exceptionally on what was a challenging day in equity markets, reflecting the resilience of the sterling covered bond market as a whole and continued decent cash positions with investors.

“It further demonstrates the rock hard credit that is Lloyds Bank,” he added, “and its strength in a volatile market.”

Syndicate bankers at and away from the leads said the deal priced at around flat to fair value, based on the issuer’s outstanding March 2023 paper trading at 37bp.

“This part of the curve is remarkedly well bid at the moment,” said another lead syndicate banker. “It’s been a while since we’ve seen a three year and it was very well subscribed.”

A syndicate banker away from the leads noted that before the transition from Libor to Sonia began in mid-2018, sterling floating rate notes had been priced more tightly than Lloyds’ trade. He calculated that the Sonia plus 37bp pricing was equivalent to around Libor plus 25bp and said that previous equivalent issuance had come in the mid to high teens over Libor.

Caisse de Refinancement de l’Habitat (CRH) today announced plans for an eight and 15 year dual-tranche benchmark transaction via Barclays, Crédit Agricole, Credit Suisse, HSBC, LBBW and Natixis, which is expected to hit the market tomorrow (Tuesday).

According to pre-announcement comparables circulated by the leads, its November 2026s and October 2029s were trading at 1bp and 2bp over mid-swaps, mid, respectively. BPCE January 2035s issued on 15 January were quoted at 5bp, and ABN Amro January 2035s sold on 7 January at 3bp.