UPDATE 1-UK's Lloyds eyes covered bond debut-sources

* Lloyds looks at debut issue after roadshow

* Covered bond spreads widen on sovereign concerns (Adds more detail)

LONDON Jan 29 (Reuters) - UK bank Lloyds (LLOY.L) is considering making its debut covered bond issue in euros, banking sources familiar with the situation said on Friday.

The UK bank held a non-deal roadshow with investors earlier in January, but timing of any deal is not certain, the sources said.

The banks involved in the roadshow were Deutsche Bank, LBBW and Natixis. They are expected to manage any deal, along with Lloyds itself, the sources said.

Lloyds was not immediately available to comment

Covered bonds are highly-rated securities backed by pools of mortgages, which remain on the issuing bank's balance sheet. They are expected to play a big role in funding Europe's banks this year as they are relatively low cost.

There has been around 28 billion euros ($39.31 billion) of covered bonds issued this month, according to data from Barclays Capital.

But issuance has slowed this week partly in response to increased volatility across bond and equity markets because of concerns over sovereign risk, with Greece particularly in the spotlight.

Covered bond spreads in the secondary market have widened out as a result. German and French covered bonds have widened by about 2 basis points over the past week, one analyst said.

Spanish covered bonds are about 5 basis points wider, he said, partly reflecting sovereign concerns.

"Some bonds issued by Spanish banks in early January are now about 10 basis points wider than at their launch," the analyst said. (Reporting by Jane Merriman and Alex Chambers; Editing by Rupert Winchester)