Euro covered bond supply will likely slow next week as blackout periods take effect, according to bankers, after Leeds yesterday (Thursday) capped a “great week” for UK issuers with a Eu500m (£398m) four year debut that the building society’s director of treasury said exceeded expectations.

Six euro benchmark covered bonds totalling Eu5bn were sold this week, of which bankers said Leeds Building Society’s debut euro benchmark covered bond was the highlight.

“It’s been a very productive week,” said one. “Everything’s gone well at the least, and some – namely Leeds – were very impressive.”

Leeds Building Society leads Danske, HSBC, Natixis and UBS priced the Eu500m no-grow four year issue at 27bp over mid-swaps, after having launched the deal with initial guidance of the 30bp area. The book closed at over Eu1.3bn from more than 70 accounts.

“It was a very decent result,” said a syndicate official away from the leads.

Syndicate officials at and away from the leads said the size and quality of the order book showed that investors are still confident in buying UK names, in spite of concerns over the consequences of a possible UK exit from the EU, after a referendum on the country’s membership on 23 June.

Paul Riley, director of treasury at Leeds Building Society, said that the deal went very well.

“We had planned our entry to the euro covered bond market for some time and having recently posted excellent financial results we felt timing was good,” he told The CBR. “We were mindful of Brexit, but used the investor roadshow to test sentiment.

“Pricing was in line with my expectations,” he added, “but the execution and demand exceeded my expectations.”

Syndicate officials noted that non-domestic participation was particularly high.

Accounts from Germany and Austria were allocated 43% of the deal, the Nordics 20%, the UK 12%, the Benelux 11%, Switzerland 3%, other Europe 10%, and others 1%. Banks took 35%, central banks and official institutions 28%, fund managers 24%, and insurance companies and pension funds 13%.

“We keep talking about these deals becoming more challenging,” said a syndicate official, “but it isn’t happening.”

Bankers said the deal proved popular in part because it offered a relatively attractive spread and yield – of 0.208% – at the shorter end of the curve. The deal is the first non-German euro benchmark covered bond with a maturity shorter than five years since 21 January, when Crédit Agricole sold a Eu1.5bn long four year OH.

“This was a rare chance for investors to get some good yield at the short end,” said one. “The maturity, the price – it seems the issuer and leads got everything right with this one.”

Leeds had previously issued covered bonds in sterling.

“Developing our funding franchise into the euro covered bond market is an important strategic move to increase diversification and improve execution,” said Riley.

Leeds’ deal was launched on the same day as a £400m 10 year senior unsecured issue for Yorkshire Building Society, and following a £750m three year floating rate note covered bond for Nationwide Building Society on Wednesday.

Syndicate officials noted that the further supply from UK building societies had also been well received. Yorkshire’s senior issue yesterday attracted over £1bn of demand from more than 115 accounts and was priced at 210bp over Gilts, down from initial price thoughts of the 220bp area.

“It was a great day for the two, a great week for the UK building societies and probably the reason why UK Financials yesterday outperformed, as some of the shorts out there got ‘squeezed’,” said a banker.

Nationwide’s £750m three year FRN on Wednesday attracted orders of £1.1bn and is the joint-largest sterling deal of the year, alongside a deal of the same size and tenor from Lloyds on 5 January.

Nationwide’s deal also ended a run of widening spreads in the benchmark sterling covered bond market, pricing inside the last deal – a £250m three year FRN for CIBC priced at 52bp on 3 March – after each issue launched after Lloyds’ had been priced wider than the one before.

“It all shows that investors are still comfortable with UK names, but besides that, building societies are generally a good model for overall bank risk, and it shows people are confident in that,” said a syndicate official away from the deals. “In terms of Leeds and Yorkshire, it is also good to see the smaller names well supported.

“Overall I remain very confident on this sector.”

Syndicate officials said the pipeline for further covered bond supply next week looks relatively clear, noting that many issuers – including Nordic and French names – will be entering blackout periods.

“It has been an encouraging week all round, so I think there will be some more activity, but there is not much lined up so far,” said one.

Another banker agreed, adding that reduced issuance would allow recent heavy supply to be digested.

“Our traders are happy that today has been quieter on the primary side, as it will allow the secondary market to pick-up after not much activity,” he said.

The banker said that recent longer-dated paper was well bid this morning, particularly a Eu2.25bn 15 year ABN Amro issue sold on Wednesday of last week.

Vakifbank will today (Friday) complete a European roadshow ahead of a potential first Turkish euro-denominated mortgage-backed covered bond, but will give investors around two weeks to finish credit work before entering the market if a deal does indeed follow, according to an official at the issuer.

The Mortgage Society of Finland is set to go on the road from Monday to Thursday (22 April) ahead of a potential euro-denominated covered bond debut, a Eu250m issue, but a syndicate official at one of the leads said the deal may also not be launched immediately upon on the conclusion of the roadshow.