Leeds Building Society priced its second covered bond in the public markets on Wednesday, a £250m seven year Regulated Covered Bond, and a funding official at the issuer told The Covered Bond Report that he was pleased with the results relative to its peers.

Paul Riley, general manager and group treasurer at Leeds Building Society, said that the issuer saw a window of opportunity this week.

“We were out roadshowing last week so we were minded to come to the market this week, and we saw an improvement in market sentiment and a number of markets opening up on Tuesday, which gave us the confidence to go on Wednesday,” he said. “We went out at around 1030 after finalising some indications of interest, and then the book grew very strongly and pretty quickly, which enabled us to close by around 1530.”

Riley said that the £250m size was broadly the target from the outset.

“With a balance sheet size of £10bn and a wholesale funding ratio below 20%, our appetite for funding is relatively modest,” he said. “We were keen to give enough liquidity to get into the benchmark indices, but we are not in the realms of the £750m deals that we see from some of our peers.

“Having now done two deals in the £250m space, we are beginning to build a little niche for ourselves there.”

Barclays Capital and HSBC priced the transaction at 165bp over Gilts.

Yorkshire Building Society launched the first seven year UK benchmark covered bond in sterling in early April, a £750m seven year deal at 153bp over Gilts, and Coventry Building Society came the following week with a £750m seven year at 145bp over. Since then, in late May, Moody’s put the covered bonds of seven UK issuers on review for downgrade as a result of a review of systemic support for UK financial institutions.

“On the Gilt side, the key difference from when the market was in a healthier state and Yorkshire and Coventry tapped the market is Moody’s reviews of systemic support for UK financial institutions,” said Riley. “We are not included, as our rating does not incorporate any such uplift, but it has definitely put some negative sentiment on the market and as we had seen secondary spreads tick up a bit we had to give a little bit back in the pricing.

“However, we don’t keep the bonds in fixed, but swap back to three month Libor, and our estimate is that the level we achieved on this basis is very comparable to what our peers achieved, and we would normally expect to be bang in line with them.”

Leeds’ issue in November was a 10 year, but although Yorkshire and Coventry launched their seven year issues, the bulk of UK supply since then has been beyond 10 years.

“The focus of a good few of the underlying investors is on getting duration, but 10 years is probably the extent of our appetite for duration,” said Riley. “And after the solid benchmarks for Yorkshire and Coventry we felt that there was an opportunity in seven years, which fits very well with our maturity profile internally.”

Leeds roadshowed in London and Manchester ahead of the new issue.

“We had a bit of non-UK participation from central banks,” said Riley, “but the UK was the focus, of course.”