United Overseas Bank (UOB) priced an upsized £850m five year debut Sonia-linked deal 1bp wide of Canadian paper today (Tuesday), with a lead banker noting that an outcome inside fair value had allowed the issuer to achieve the most competitive outcome available globally.

After the Singaporean mandate was announced yesterday (Monday), leads Credit Suisse, BNP Paribas and UOB this morning went out with initial price thoughts of the Sonia plus 32bp area for the five year sterling benchmark FRN, rated triple-A. After books topped £1bn, the spread was set at 29bp, and the deal was ultimately sized at £850m (€996m, SGD1.58bn), on the back of more than £975m of demand good at re-offer.

The pricing compares with a spread of 28bp achieved by Bank of Montreal on a £1.5bn five year FRN last Wednesday and a syndicate banker at one of the leads said the pick-up of just 1bp that UOB had achieved versus the Canadian meant the deal had come 1bp inside fair value, based on relative value in euros, where he saw Singaporean paper 2bp wide of Canadian paper.

“They have managed to compress the differential to Canada in sterling,” said the lead banker.

He said such a level is appropriate, given that in euros Canadian covered bonds are repo-eligible but Singaporean covered bonds are not, whereas in sterling the two are treated the same.

“So that’s how it should be,” he added, “and arguably they should be flat in future.”

The sterling transaction comes after a week in which issuers globally tapped Aussie dollars, US dollars and sterling, and the lead banker noted that the three biggest markets – euros, sterling and US dollars – offer funding levels flat to each other, meaning that by coming 1bp inside fair value in sterling, UOB had tapped the most competitive option.

The issuer had been targeting a £500m minimum trade, according to the lead banker, but upsized the deal in light of the £1bn-plus peak order book, without stretching beyond £850m towards the final £975m book size. He noted that the book included new investors for UOB, beyond those who had participated in its previous sterling FRN, a £350m five year Libor-based deal in February 2018.

“It was a phenomenal result,” he added. “It outperformed on every metric from our standpoint.”

He said the issuer’s previous visit to sterling, as well as non-deal investor work conducted earlier this year and marketing in the 24 hours prior to launch contributed to the deal’s outcome.

A couple of other issuers are eyeing the sterling market, he added, but did not yet have firm issuance plans.