Market participants said some confidence had returned to the market today (Friday) following yesterday’s spike in fears over a Greek debt restructuring. Covered bond bankers hoped that this weekend would help turn around the market enough for new issues next week.

Yesterday Olli Rehn, the European Commissioner for monetary funds, said that the EU and the IMF had agreed to release a fifth tranche of Eu12bn in funding to Greece by next month, while the EU is conducting a series of meetings this weekend. This has raised hopes that an agreement on a new bailout package for the country is close to being agreed.

“The pressure is easing off big time,” said a syndicate official. “The Bund future is 50 ticks lower, Spain has tightened 10bp versus Germany in 10 years, and the euro is a point higher.

“The politicians have finally called in the fire brigade to douse the flames in the market as we speak. This means we will probably have a window for deals out of core countries next week.”

Evangelos Venizelos

Greek prime minister George Papandreau reshuffled his cabinet, replacing finance minister George Papaconstantinou with Evangelos Venizelos, and the new line-up will be subjected to a vote of confidence in parliament on Sunday.

“I think it’s good we have the weekend to help the dust settle,” said another syndicate official. “The pipeline remains quite full with some issuers, such as ING-DiBa, having ended roadshows this week.

“Issuers will watch how the markets open on Monday and decide over the course of the day whether to come to market or not, but I think we won’t see anything before lunchtime Monday, if not Tuesday.”

In spite of the better tone, a covered bond banker said that the market trend was not yet identifiable.

“The market is a bit better,” he said, “but not good enough to have any visibility on next week. What can be decided this weekend on the Greek situation is awaited in order for the market to go in another direction.”