Lloyds TSB raised $1 billion via a residential mortgage-backed bond on Friday, reopening a U.S. market that had been shut since mid-2008 because of the credit crunch.

The lender sold 2.5 billion pounds worth of bonds in a five-tranche deal, which also included three sterling and one euro tranche.

While this is the second residential mortgage-backed securitization from the UK bank in recent months, it is the first dollar currency deal since the credit crunch began.

Lloyds issued its latest deal at far more attractive spreads. The three-year dollar tranche was offered at 115 basis points over Libor, while the five-year sterling was at three-month Libor plus 130 bps.

The previous Lloyds sterling tranche came at 170 bps over three-month Libor.

Perhaps more notably, it is the first non-agency issue of RMBS in the United States.

Such deals, frequently called private label RMBS, were a staple of the U.S. bond market and were frequently repackaged into collateralized debt obligations (CDOs).

It is a good thing to see some resemblance of a market coming back in new issue form, said Jesse Litvak, a managing director at Jefferies & Co, Stamford, Connecticut.

Poor performance of U.S. subprime RMBS in particular, was responsible for massive losses at many banks who created CDOs. And investors have shunned the RMBS sector as the U.S. housing market continues to decline.

In recent weeks, however, there has been speculation that the private label market, using U.S. mortgages, might be revived.

U.S. investors used to regularly buy RMBS issued by UK banks. On Friday, Lloyds TSB used an issuance vehicle called Permanent, which it inherited from HBOS when it bought the UK mortgage bank in an ill-fated move at the start of 2009.

HBOS was one the biggest UK issuers into the United States, alongside Northern Rock and Abbey.

(Additional reporting by Albert Yoon in New York; editing by Simon Jessop)