Yorkshire Building Society sold a debut, £750m seven year Regulated Covered Bond yesterday (Tuesday), which was the first sub-10 year benchmark covered bond in sterling since the currency was reopened in November, and Coventry Building Society will be roadshowing ahead of a sterling debut.

Leeds Building Society launched the first sizeable covered bond in four years in November, a £250m 10 year deal, and in January and February Nationwide Building Society, then Lloyds TSB and Abbey sold 15, 18 and 15 year benchmarks, respectively.

“This is something that we have been wanting to do for a long time,” said Chris Parrish, group treasurer of Yorkshire Building Society. “We have been in the euro market since 2006, but until now there was not much of a sterling market.

“It is good that the market has not only got going, but that we have here been able to open up a new maturity, as this is the first time a seven year has been completed.”

Parrish said that locking in the 10 year plus maturities that have been issued so far in sterling would be difficult for Yorkshire.

“Really for us that is a bit too long in terms of the assets in our balance sheet, which are typically five to 10 years,” he said.

The issuer held a general roadshow in February after the release of its annual results, partly because of its merger with Chelsea Building Society last year, and Parrish said that the issuer received a lot of enquiries from UK investors about the possibility of seeing a sterling covered bond from Yorkshire.

“A lot of it is looking forward to Solvency II,” he said, “where the risk weighting is quite favourable versus the corporate bonds these guys would normally buy. That, combined with a reasonable spread for a quite highly rated bond.”

Yorkshire’s covered bond issue was the first in sterling not to be rated only triple-A, with its Aa1/AAA ratings from Moody’s and Fitch.

“We went back to Europe last year with the split rating and it had no discernable impact on execution,” said Parrish, “and no-one raised the issue here.”

The building society sold a Eu600m five year covered bond in September.

He said that although he could not be sure which investors had participated in the longer dated sterling issues, most of the big key UK players would probably be involved in those as well as Yorkshire’s seven year. However, he said that the participation of a central bank in the seven year was more typical of shorter dated issues.

Leads Barclays Capital, HSBC and UBS priced the seven year issue at 153bp over Gilts, following guidance of the 155bp area, after building a book of £1.3bn for the issue, which was capped at £750m from the outset. A syndicate official said that UK real money accounts drove the deal, with 75 investors participating.

Parrish said that the pricing was roughly flat to, or slightly inside, what the issuer might achieve in euros.

“We’re certainly very pleased with the pricing,” he said, “although it’s not really about pricing; it’s about the diversity of investors. It is also helpful when we are talking to European investors and they see the domestic support.”

Coventry Building Society is understood to have mandated Barclays and BNP Paribas. The building society has not previously issued publicly but set up its programme when many UK financial institutions were seeking to access the Bank of England’s Special Liquidity Scheme.

Barclays Bank is understood to have looked at the possibility of issuing a debut sterling covered bond issue, after having been active in euros.