National Australia Bank made a bumper start to the year by issuing a £1.5bn four year Sonia FRN today (Thursday) that attracted a peak £1.7bn of demand, with the size eclipsing anything seen yet in euros this year as much of continental Europe was on holiday.

Following a mandate announcement yesterday (Wednesday), National Australia Bank (NAB) leads HSBC, Lloyds, NAB, NatWest and RBC this morning opened books with initial guidance of the Sonia plus 30bp area for the December 2025 issue, expected rating triple-A. After an hour and 10 minutes, they reported books above £1bn, excluding joint lead manager interest. After two hours and 10 minutes, the spread was set at Sonia plus 27bp on the back of books of £1.7bn, excluding JLM interest. The size was ultimately set at £1.5bn (€1.79bn, A$2.80bn) on the back of books above £1.65bn, excluding JLM interest, good at re-offer, pre-reconciliation.

“It was a great deal,” said a lead syndicate banker. “It’s a really good start to the year with the first sterling covered, and interesting to see an international issuer take advantage of the execution conditions first.”

He said the sterling covered bond market was well positioned for new year issuance on the back of cash inflows, and with investors less nervous about the outlook than they had been going into year-end.

He noted that NAB’s deal comes after international issuers enjoyed attractive conditions in the sterling market last year. The last sterling deal was a £1bn four year Sonia-linked benchmark from Canadian Imperial Bank of Commerce (CIBC) on 8 December, while in September, Bank of Nova Scotia and Bank of Montreal sold £1.5bn sterling FRNs. NAB is the first Australian to have matched that size in sterling.

The sterling reopener is also larger than any benchmark yet in euros this year, with the largest having been a €1.5bn dual-trancher for Erste Bank on Tuesday.

NAB’s last sterling covered bond was a £1bn five year Sonia-linked deal launched in January 2020.

“The issuer was well rewarded for their bravery in putting a mandate announcement out yesterday, taking a degree of risk,” said the lead banker, “but investors responded very well to that, as they had time to look through the details of the transaction and get ready for books opening this morning.”

Lead syndicate bankers put fair value for the transaction at Sonia plus 26bp, based on the secondary levels of NAB February 2025 paper and Canadian 2025 and 2026 paper, implying a new issue premium of 1bp.

Another lead banker said that given the size book, they could have looked to move more than 3bp, but that the final terms reflected a fair balance for investors.

“The fact that the order book barely moved with that spread revision meant that investors were pretty receptive,” he added. “And the ability to come back to a market they hadn’t been to in a couple of years and take out this size was pretty impressive execution all around.”

Lead bankers expect today’s successful transaction to spur on other issuers thinking of accessing the sterling market in the near term.

“There will definitely be more supply,” said one. “I expect next week to have at least one transaction in the market.”