Yorkshire Building Society is set to launch the first UK euro benchmark in almost nine months tomorrow (Tuesday), approaching the market while its peers have been buying back covered bonds. MMB and SMTB are expected with €500m 10 year and seven year euro benchmark issues, respectively.

Yorkshire announced its plans for a euro denominated benchmark covered bond this (Monday) morning and made itself available for investor calls. Danske, HSBC, UniCredit and Natixis have the mandate.

The last UK euro benchmark was a €1.25bn (£1.14bn) seven year from Santander UK on 8 January. The last UK benchmark covered bond in any currency was a $1bn three year Reg S/144A deal for Nationwide Building Society on 5 February.

A syndicate banker away from the leads said he was surprised to see the UK issuer approaching the market at this stage of the year, but nevertheless confident it will produce a strong trade.

“UK issuers withdrew from the primary market due to this combination of Covid and Brexit discussions,” he said, “but funnily enough, Yorkshire have been double active as they did euro seniors and now they are putting a euro covered on top of it, which is even more surprising.”

Yorkshire sold a €500m five year senior preferred bond at 110bp over mid-swaps on 10 September.

“All of the recent Yorkshire covered bonds have done very well,” added the syndicate banker, “so I assume this one will also perform decently.”

UK banks have been absent from the covered bond market since February in light of alternative funding options in the wake of the crisis, such as the Bank of England’s Term Funding Scheme. Indeed, rather than issuing covered bonds, Yorkshire’s peers having been buying back debt in different currencies and formats including covered.

Lloyds bought back some £1.8bn of covered bonds in May and Nationwide some £2bn last month, while Co-op last week bought back £117m of its only outstanding covered bond.

Yorkshire’s last euro benchmark was a €500m no-grow five year in April 2019. Its last benchmark covered bond was a £750m five year FRN in November 2019.

“For quite some time Yorkshire has been dedicated to euro covereds and has looked to them for term funding when needed,” said a lead banker, “so they want to maintain their foothold in a market which has served them so well over the years.”

He noted that the new issue will extend Yorkshire’s maturity profile beyond 2024.

Yorkshire 2024 paper was trading at around 17bp-18bp over mid-swaps, according to the lead banker, Santander UK 2024-2025 paper at 14bp-16bp, with Lloyds 2024 paper at around 10bp.

“UK four to five year paper is around the mid to high teens,” he added, “with Lloyds being a little bit tighter.”

Maureen Schuller, head of financials sector coverage, noted that UK covered bonds spreads have fully recovered from widening earlier this year.

“Part of the spread retightening can be explained by the lack of supply on the back of the BoE’s new Term Funding Scheme,” she said, “and the subsequent buybacks in UK covered bonds.”

According to Schuller, €10bn of covered bonds matures this year, €2bn of it this month, while a €500m Yorkshire benchmark matured in June.

My Money Bank SCF (MMB SCF) is set to launch a €500m no-grow 10 year obligations foncières soon, having announced its plans today. The French issuer will be available for calls from tomorrow.

The new issue will be MMB’s third euro benchmark, with its last, a €500m no-grow 10 year, having been launched in September 2019.

A lead banker said while MMB is not the most established of names, the current strength of the market should stand it in good stead.

“Like most issuers, they’re not in real need of money,” he said, “but markets being as brilliant as they are – spreads so tight and demand so exuberant – they decided to pick this option rather than refuse it.”

According to pre-announcement comparables circulated by the leads, MMB October 2025s and September 2029s were at 10.5bp and 17bp, mid, respectively, on an i-spread basis.

“In terms of spread, My Money Bank differs from the rest of the SCF pack,” added the lead banker, “so these are the most important comparables to look at.”

The last French euro benchmark, a €1.25bn 10 year from Compagnie de Financement Foncier (CFF), was launched on 17 September at 7bp over and is now at 5.5bp, mid.

A syndicate banker away from the leads said he expects the new issue to be launched as early as Wednesday. BNP Paribas, Crédit Agricole, DekaBank, DZ, HSBC and Natixis have the mandate.

Sumitomo Mitsui Trust Bank (SMTB) is set to launch a seven year euro benchmark later this week, having re-affirmed its plans today. The Japanese issuer held investor calls for the debut issue last week.

Goldman Sachs, BNP Paribas, Crédit Agricole, Barclays, UBS and Daiwa Capital Markets have the mandate.