The increase in U.K. covered bonds shows a return of investor demand driven by an appetite for non-Euro denominated bonds, Bank of America Merrill Lynch analysts said.

The recent Yorkshire Building Society deal brings U.K. covered bond volumes close to £8 billion ($12.6 billion) for 2012 compared to £3 billion for 1Q11.

Yorkshire priced its four-year, £500 million covered bond at 175 basis points over the three-month Libor. It also comes almost a year after the issuer’s last sterling offering, according to Standard & Poor's. S&P rates Yorkshire Building Society 'A-'/'Stable/A-2'.

BofA Merril analysts expect another £2 billion of issuance to come to market from U.K. banks, which have not yet been active in the sector.

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