Lloyds squeezes through bond in tough day for credit

By Will Caiger-Smith

NEW YORK, Jan 19 (IFR) - Lloyds Bank defied worsening sentiment in the broader credit markets on Tuesday after generating almost US$2bn of orders for a defensive US$1.2bn three-year senior bond.

The UK bank, issuing through its operating company, was the only FIG issuer to hit the market on Tuesday, when stocks opened strongly only to reverse course as the day wore on.

"We thought a couple of the domestic self-funding banks would come today," said a syndicate banker away from the deal. "It (Other OTC: ITGL - news) was a good window...now the market is weaker."

Market participants gave a wide range of estimates of the concession Lloyds paid over its existing curve, putting it between 7bp and 17bp. Bankers close to the trade were spotting the existing 2018s with G-spreads of anywhere between 78bp-89bp.

The US$750m fixed-rate tranche priced with coupon of 2.05% to yield 2.096% or 100bp over Treasuries, the tight end of guidance of 105bp area (+/-5bp) and inside IPTs of 110bp area. The US$450m FRN come at the equivalent over Libor.

Leads Bank of America Merrill Lynch, JP Morgan, Lloyds, Morgan Stanley (Xetra: 885836 - news) and TD Bank found close to US$2bn of demand for the bonds, skewed towards the fixed-rate notes.

A banker involved in the deal said the broader market volatility had little effect on execution.

"We might have left it out there for 30 minutes longer than usual, but it was quite orderly," he said.

The bonds were trading 1bp tighter on the break, he said. (Reporting by Will Caiger-Smith; Editing by Paul Kilby and Jack Doran)