Market participants were divided today (Wednesday) as to when the market will next see a benchmark covered bond, with some hoping for Monday or Tuesday but others anticipating that there will be no issuance until at least the end of next week.

Syndicate officials attributed the absence of new issuance this week to a downturn in sentiment, high volatility and a series of policy meetings and economic data releases.

“Tuesday was another day without supply in the covered bond market, as the background noise remains just too loud,” said Royal Bank of Scotland analysts, citing a meeting yesterday (Tuesday) of the German, Dutch and Finnish finance ministers on collateral for Greek loans.

Market participants had also been awaiting a decision of Germany’s constitutional court on whether euro-zone crisis measures violate German law and European treaties; the court this morning decided this was not the case, but its ruling gave more decision making power to the German parliament’s budget committee.

The European Central Bank and the Bank of England will tomorrow (Thursday) hold regular policy meetings, with US president Obama due to give a speech on the economy and jobs before a joint session of Congress. A syndicate official pointed out that G8/G7 finance ministers are meeting on Friday in Marseille.

Pressure on secondary market spreads continued this week, with French covered bonds feeling the brunt of widening that affected most market segments. According to HSBC Trinkaus analysts, French covered bonds widened by an average of 10bp over swaps, with a 35bp gapping out of obligations foncieres issued by Dexia Municipal Agency the main driver of this development. Natixis analysts said that UK, Dutch and Scandinavian covered bonds widened by up to 5bp-10bp on the back of some selling interest since the start of the week, with German Pfandbriefe the only segment resisting the pressure.

Many covered bond bankers are sceptical benchmark supply will resume before a plenary meeting of the European Covered Bond Council next Wednesday and a covered bond conference in Barcelona next Thursday, although some said that there could be issuance opportunities at the beginning of next week, if market conditions stabilise.

“The market needs a couple of days to catch itself,” said a syndicate official,” which leaves only Monday or Tuesday, possibly Wednesday.”

Another said that market sentiment had improved somewhat this morning, but that it would be premature to contemplate supply coming on the back of that this week. There could be a “small window” at the beginning of next week, he added.

But another syndicate official suggested that today would have been a good issuance window.

“Since windows are few and far between, I was a bit disappointed no one came today,” he said. “We tried to push issuers yesterday to come today because we knew there was going to be this window, but nobody wants to be the first to reopen after a slowdown.”

He identified HSBC SFH as a potential candidate to tap the market early next week.

“You also never know what German or Nordic issuers are looking,” he added.

HSBC SFH is wrapping up a series of investor meetings to introduce its new obligations de financement a l’habitat programme, while Norway’s Terra BoligKreditt finishes a roadshow today.

The UK’s Coventry Building Society has mandated for a roadshow starting on 19 September ahead of a possible euro covered bond, with Bank of America Merrill Lynch, Danske Bank, HSBC and Landesbank Baden-Württemberg due to lead manage any new issue.

Other syndicate officials focussed on the week of 19 September as the likeliest time for a resumption of issuance.

“I think the week after Barcelona is the earliest,” said a syndicate official, “unless there’s a really gung-ho issuer who finds a mad block of investors.”

Another syndicate official agreed there would be no issuance this week.

“This week people will not want to do something because it sends a signal of desperation,” he said. “We will not see something next week – because of the conference – but the week after.

“We need to have less supply ideally, so this isn’t such a bad thing.”