Syndicate bankers said that market conditions were supportive today (Monday), with a Coventry Building Society three year deal in the market, but many were unsure about how future issuance would proceed even if investors’ risk appetite appeared to be gradually increasing.

One said that the new issuance was being launched with “measured speed”, which was positive, and that the market was open across a range of maturities and that cheaper names from core jurisdictions seemed to fit the bill.

Another said that the backdrop was “pretty solid”, with sufficiently highly rated issuers also able to consider issuing in the senior unsecured market, which had recently opened up to longer dated supply in fixed rate format.

HSBC Bank is in the market with a seven year senior unsecured benchmark at 160bp-165bp over, with the order books said to be in excess of Eu2bn, while Standard Chartered and Svenska Handelsbanken last week sold five year and 10 year fixed rate senior unsecured debt, respectively. These transactions follow some floating rate, short dated deals that reopened the senior unsecured market.

Covered bond issuers, meanwhile, are in wait-and-see mode, according to a syndicate official, wanting to gauge how secondary market spreads develop following a “good consolidation” and re-steepening of yield curves, with the start of a second European Central Bank covered bond purchase programme (CBPP2) also anticipated.

He said there was “a bit of greed, or hope, to put it politely” beginning to come into play and that whether or not issuers are right to wait will depend on the extent to which European policy makers are deemed to make progress on the euro-zone sovereign debt crisis this week. In the absence of any significant results in this respect, it may turn out that it would have been better for issuers to tap the market rather than bide their time, he added.

However, many issuers have already raised a lot of funding this year, he noted.

“It doesn’t feel like there’s a massive sense of urgency,” he said, adding that there was “a degree of tentativeness” among investors.

A fund manager said that he did not expect any significant change in dynamics in the covered bond market for the rest of the year, and that although his house was long the asset class it was also cautiously involved given the lack of any convincing resolution of the euro-zone sovereign debt crisis.

He said French issuers still have funding needs and that he could imagine a rush of supply in that segment when CBPP2 begins. For now new benchmark supply was “trickling” in, he said.

The UK’s Coventry Building Society launched a Eu500m minimum three year Regulated Covered Bond this morning with guidance of the 130bp over mid-swaps area. Leads Bank of America Merrill Lynch, Danske, HSBC and Landesbank Baden-Württemberg had built books in excess of Eu500m by 1130 CET.

A syndicate official at one of the leads said that size and pricing would be determined Monday afternoon. Though the price had yet to be determined when The Covered Bond Report went to press, the syndicate official said “we’re probably not going to see a billion”.

“That was not the plan from the beginning,” he said. “The issuer has some limits on the cover pool.”

He said the books were mainly driven by German, Scandinavian and UK interest.

The level compares with a re-offer spread of 130bp over for a Eu1.5bn five year from fellow UK issuer Nationwide Building Society on 6 October.

“That transaction played an important role for us,” said the syndicate official. “We just adjusted for a smaller size and added a pick-up for investors.”

Syndicate officials away from the leads were positive about the transaction, citing the UK bank’s safety from the euro-zone crisis as a reason for the trade to fare well.

“This was probably the right approach for them,” said one. “I think the UK is an interesting place at the moment for investors.”

Another syndicate official said: “In general, British names are not that conflicted, so the window is there for them.”

UniCredit Bank Austria has mandated Danske, DZ Bank, Erste Group, NordLB and UniCredit to lead manage a public sector Pfandbrief that is expected to be launched in the coming days after a roadshow in Scandinavia. The deal is expected to come with a medium term maturity and syndicate officials suggested the issuer might choose a five year maturity.

Spanish and Italian issuers, such as BBVA and Intesa Sanpaolo, were rumoured to be “sniffing around” the market.

“It could be a positive story for the market,” said a banker.

Another syndicate official doubted the basis for the rumours.

“I think all these rumours were mostly driven by blackouts, more than anything definitive,” he said.