Benchmark covered bond issuance may be in for a slowdown that some syndicate bankers last week said was necessary, albeit not on its own terms, as weak US jobs data and renewed concerns about the euro-zone debt crisis pushed markets into selling mode this (Monday) morning.

Credit markets were wider across the board and stocks down this morning, with 10 year Bund yields at record lows and peripheral sovereigns and senior financials among market segments under pressure, according to syndicate officials.

“It’s an all-out shocker, an all-out mess,” said one, citing widening of credit indices such as iTraxx’s SovX, Crossover, and Main.

He said that these movements showed that “a range of parties are effectively throwing in the towel”.

However, there was only limited selling of covered bonds, he added.

Another syndicate banker said that the Bund future “knows only one way – up”.

Today was not a good day to launch benchmarks, he added, pointing out that the German state of Lower Saxony was the only issuer in the market earlier this morning and that this was a reasonable move given that the issuer is rare, zero per cent risk weighted, and seen as a Bund proxy.

“That is the only thing that can be contemplated at the moment,” he said.

Others also said that the sharp downturn in sentiment has shut the benchmark covered bond market to new supply, although the extent and duration of the closure is unclear.

One syndicate official said that the prospects of benchmark issuance this week depended on the outcome of “potential market movers” such as a meeting of the Dutch, Finnish and German finance ministers about the provision of collateral for loans to Greece.

Germany’s constitutional court is also due to rule this week on whether Germany’s contributions to bail-outs of Greece, Ireland and Portugal violate German law and European treaties, while market participants will also be focussed on a monthly policy meeting of the European Central Bank on Thursday.

The syndicate official said that today was “definitely a no-go” and suggested that the only issuer that may be able to tap the primary market this week if sentiment remains shaky is HSBC SFH.

The French issuer is understood to be finishing a roadshow tomorrow (Tuesday).

Another syndicate banker said that it was difficult to know whether benchmark supply would be able to resume this week, in particular as there was little on the agenda that could improve sentiment.

He suggested that issuance, if market conditions permit, would mainly be possible tomorrow or Wednesday, but said that adopting a wait-and-see stance was advisable if issuers were not in great need of funding.