The covered bond primary market was quiet today (Thursday) as macroeconomic conditions affected the ability of issuers to come to market, with the Greek debt crisis reaching a new stage of uncertainty.

“The market is just in terrible shape,” said a covered bond banker. “It’s all focussed around Greece.

George Papandreou

“Short term yields on Greece are continuing to go up and up.”

The syndicate official said issuers were in wait-and-see mode.

“It’s all down to political pressures and infighting within Greece,” he added. “Until there is some sort of solution, we are not going to see primary activity of any kind.”

Greece prime minister George Papandreou is set to unveil a new cabinet and to put this new government to a vote of confidence in parliament on Sunday.

The FTSE All-World equity index was down 0.8% this morning, US Treasury yields had dropped, while Bund futures rose in popularity. Market participants said a Spanish auction had been a bit disappointing.

“I doubt a deal could be done today,” said a syndicate official. “I know there are some in the pipe but doubt they would come this week.

“The long part of the curve might be particularly difficult to access.”

Another syndicate official agreed that no issuer would be launching a deal today under current market conditions.

“The rot is starting to spread to the core markets,” he said, speaking of a Sampo Housing Loan Bank Eu1bn 10 year covered bond priced at the wide end of guidance on Tuesday. “We’re starting to see the Nordics, a traditionally strong area, being affected.

“To be honest, I’m a bit surprised the market is taking this so horribly,” he added. “Greece is quite old news.”

The syndicate official said he knew of a couple of projects in the pipeline that were no on hold until market conditions improved. Several issuers have finished roadshows without yet having followed these up with new issues.