Lloyds 3Y/7Y EUR Covered: FV ~MS+19/+33 vs IPT MS+23/+39
Lloyds 3Y/7Y EUR Covered: FV ~MS+19/+33 vs IPT MS+23/+39
Lloyds Bank PLC opened books today on a dual-tranche EUR covered benchmark — a 3Y at MS+23 area (€1.5bn expected) and 7Y at MS+39 area (€500m expected). Both are AAA-rated, soft-bullet, settling 12 May. Against UK covered peers and the issuer's own Pfandbrief curve, fair value sits at MS+18-20 on the 3Y and MS+32-34 on the 7Y. IPTs offer ~3-5bp concession on the 3Y and ~5-7bp on the 7Y.
Deal Terms
| Tranche | Maturity | IPT | Exp. size |
|---|---|---|---|
| 3Y Fixed | 12 May 2029 | MS+23 area | €1.5bn |
| 7Y Fixed | 12 May 2033 | MS+39 area | €500m |
Expected ratings Aaa/AAA. Reg S CAT2, bearer, soft-bullet. Annual coupon, act/act ICMA. Settlement T+5.
Fair Value — 3Y
Closest comps are recent UK AAA EUR covereds plus the issuer's German Pfandbrief curve as intra-group reference.
| Comparator | Tenor | I-spread |
|---|---|---|
| Nationwide 2.375% Jan-29 | 3.71y | MS+15 |
| Santander UK 2.375% May-29 | 3.02y | MS+18 |
| Santander UK 3% Mar-29 | 3.85y | MS+18 |
| Lloyds GmbH 2.75% Sep-29 | 3.35y | MS+21 |
| Lloyds 0.125% Sep-29 * | 3.39y | MS+23 |
* Deep-discount cash price distorts implied I-spread upward; treat as soft anchor.
3Y FV cluster: MS+18-20.
Fair Value — 7Y
No exact issuer EUR covered at the 7Y point. Peer curveouts at 6-7 years anchor the read.
| Comparator | Tenor | I-spread |
|---|---|---|
| Lloyds GmbH 2.875% Sep-32 | 6.35y | MS+30 |
| Nationwide 2.875% Sep-32 | 6.36y | MS+32 |
| Santander UK 2.875% Feb-33 | 6.78y | MS+32 |
| Nationwide 3.125% Aug-32 | 7.30y | MS+33 |
| Nationwide 3.309% May-34 | 7.31y | MS+36 |
7Y FV cluster: MS+32-34.
Landing Call
| Tranche | IPT | FV | Concession | Expected landing |
|---|---|---|---|---|
| 3Y | MS+23 | MS+18-20 | 3-5bp | MS+18-19 |
| 7Y | MS+39 | MS+32-34 | 5-7bp | MS+33-35 |
Backdrop supportive: tight credit indices, low equity vol, stable cross-currency basis. Both tranches look set to price inside IPT. The 3Y should be the more heavily covered leg given size and a flatter front-end curve; the 7Y carries marginally more premium for the curve extension and smaller clip.
Disclaimer: This note is for informational purposes only and does not constitute investment advice, a recommendation, an offer, or a solicitation to buy or sell any security. The observations reflect a snapshot analytical view based on indicative pricing references at the time of writing and may not reflect current market conditions. No representation or warranty is made as to accuracy or completeness. Spreads and fair value estimates are derived from third-party comparable instruments and are inherently subjective. Investors should conduct their own due diligence and consult independent financial, legal, and tax advisors before making any investment decision. Past performance is not indicative of future results.
