Yorkshire Building Society is planning its first sterling covered bond benchmark, which will be the first in the currency since mid-February. Meanwhile, the euro market was quiet this (Monday) morning, with Caisse de Refinancement de l’Habitat tapping a 12 year deal.

Yorkshire has mandated Barclays Capital, HSBC and UBS for the forthcoming issue, which is expected to be launched later this week. Market participants said that the maturity has not been finalised, but that a seven year issue is expected.

A banker away from the leads said that he had heard early talk of a spread of 155bp-160bp over Gilts for a seven year, adding that this was in line with where he would pitch such a transaction. The range is equivalent to around 129bp-134bp over mid-swaps. The issuer’s last covered bond, a Eu600m five year deal sold in September, was said to be at 115bp-105bp over mid-swaps today.

In January and February the sterling covered bond market sprang to life, with Abbey, Lloyds TSB and Nationwide Building Society selling £1bn 15 year, £1.25bn 18 year, and £750m 15 year deals in sterling, respectively, all of which were debuts. These followed a £250m 10 year deal for Leeds Building Society in November that was the first sterling benchmark covered bond in four years.

A syndicate official quoted levels this morning of 137bp/127bp for Leeds, 116bp/113bp for Nationwide, 128bp/123bp for Abbey, and 129bp/125bp for Lloyds TSB.

A banker at one of the leads said that Leeds’ issue was quite illiquid compared with the larger, but longer benchmarks. He added that the relative pricing of the credits in euros would also be taken into account in coming up with pricing.

The building society announced its annual results last month and, having merged with Coventry Building Society last year, is now in merger talks with Norwich & Peterborough.

The benchmark euro market was quiet, with only CRH in the market this morning, with a tap of a Eu1.75bn February 2023 issue it launched in February at 75bp over mid-swaps. BNP Paribas, Deutsche Bank, DZ Bank, LBBW and Natixis have been bookbuilding at the 70bp over mid-swaps area and had taken Eu500m of orders by 1330 CET. Pricing has been fixed at 70bp and the books are due to close at 1500 CET.

“The tap has taken off very well,” said a syndicate official at one of the leads. “We have seen good demand for exactly this maturity and this bond.”

The deal comes after 10 year issues for ABN Amro, Crédit Mutuel Arkéa, Eurohypo and SEB AB last week.

“All four of those transactions went very well,” added the syndicate official. “Some investors are looking for long dated bonds with coupons of 4% plus.”

Bankers said that market conditions were good, despite lingering concerns about Portugal. Investors’ appetite for credit product was evidenced by senior unsecured issues for ABN Amro, Banco Bilbao Vizcaya Argentaria and Mediobanca this morning, which were said to be going well.