Yorkshire Building Society returned to the euro market with a Eu500m six year issue on Monday to show its commitment to covered bonds, according to head of treasury Chris Parrish, and although a number of significant investors did not participate due to Brexit, he said the book can offer confidence to other UK names.

The new issue was Yorkshire’s first benchmark covered bond since November 2015, and only the third euro benchmark covered bond from the UK since the Brexit vote last June and the launch of the Bank of England’s related Term Funding Scheme (TFS) in September, which reduced UK issuers’ funding needs.

Chris Parrish, head of treasury at Yorkshire Building Society, said the main reason behind the issuer’s decision to return to the euro covered bond market was the length of time since its last benchmark.

“We feel that it is important to show commitment to our key wholesale funding programmes and provide investors with opportunities to invest in our paper,” he said. “We value regular dialogue with investors and by building a curve in the market it helps provide liquid pricing points for our credit.

“We think that maintaining a market presence is important for our funding flexibility in that it keeps investor lines open and helps build name awareness.”

Yorkshire chose a euro-denominated issue as it would improve its investor diversification beyond its domestic market, Parrish said.

Yorkshire Building Society (YBS) leads HSBC, Lloyds Bank, UBS and UniCredit launched the Eu500m (£424m) no-grow six year issue on Monday morning with guidance of the 15bp over mid-swaps area. Guidance was later revised to the 12bp area on the back of books above Eu1bn, before the spread was fixed at 10bp with books above Eu1.3bn.

The deal followed a four day European roadshow, which concluded last Friday.

“The deal went extremely well from my perspective,” said Parrish. “We received good feedback from investors on the roadshow and it was clear that we had selected the sweet spot in targeting a six year maturity, which we believed stood the best chance of attracting a broad swathe of investment across the range of investors in the market whilst neatly fitting with our maturity concentrations.

“The pricing was in line with expectations and I think represented fair value both to ourselves as issuer but also to investors, especially given that the deal was over two times over-subscribed.”

The final book comprised 90 accounts, with banks allocated 33% of the deal, fund managers 32%, central banks 17%, insurance companies 14%, and corporates 4%. Accounts in Germany and Austria took 50%, the Nordics 15%, the UK and Ireland 12%, Asia 6%, the Benelux 6% Switzerland 4%, France 4%, and southern Europe 3%.

Parrish said demand for the deal had nonetheless been reduced by investors’ concerns over Brexit.

“Clearly the Brexit situation had an impact on the trade with a number of significant investors not participating due to Brexit uncertainty,” he said. “However, in my opinion pricing of UK covered bonds currently includes a premium versus other jurisdictions which compensates investors for this uncertainty.

“The strong performance of the deal shows that there is still significant interest in deals from the UK and we expect to continue regular issuance in this market going forward. Hopefully the success of this deal will give others the confidence to follow suit.”

Parrish added that Yorkshire plans to use the TFS alongside its regular wholesale market issuance.

“However, we have established internal limits on utilisation of the scheme to ensure that we do not become reliant on any single source of funds,” he said. “It is all about balance and we plan to keep all of our funding programmes active during the TFS period, albeit the size of transactions is likely to be lower and less frequent than they otherwise would be.”