A 12 year CRH deal was the only covered bond live in a fairly positive market this (Monday) morning, with CBPP2’s unveiling having failed to trigger large spread tightening, although a DnB Nor issue is being lined up and could encourage more supply, according to syndicate bankers.

CRH’s deal is the first since the European Central Bank on Thursday announced a second, Eu40bn covered bond purchase programme (CBPP2), a move that a syndicate banker said did not have the effect of kick-starting the heavy supply that one might have expected.

He played down the programme’s impact, saying that although it would help some transactions reach larger sizes, there are too many other aspects of the crisis that still needed to be resolved.

“I don’t see a glut of deals,” he said, adding that Caisse de Refinancement de l’Habitat had been cautious in its approach to the market by announcing only a euro covered bond issue rather than a benchmark, a move he could not fault.

“The mood is more positive, but should be enjoyed with caution,” he said.

Another said that CBPP2 was having a positive effect, but that it had failed to bring about large tightening moves in the secondary market.

Another syndicate banker said that the market was “in pretty good shape”, and that he would not be surprised if more deals were to hit the market tomorrow (Tuesday).

Downgrades of Spain and Italy by Fitch on Friday were “brushed aside” by the market, he said, while reports that German chancellor Angela Merkel and French president Nicolas Sarkozy had yesterday (Sunday) agreed on a deadline for a comprehensive rescue package was being treated as “background noise” by the market.

Norway’s DnB Nor Boligkreditt has mandated Barclays Capital, BNP Paribas, Deutsche Bank and Goldman Sachs for a five year euro benchmark that is being lined up for tomorrow. A syndicate official at one of the leads said that they will open order books tomorrow morning.

“CRH looks like it’s gone fairly well and, assuming a good response to DnB Nor, that should open the market to others, and we may get other Scandis looking,” he said.

A syndicate banker away from the leads said that a deal from DnB Nor on top of one from CRH would help make the market feel increasingly “ripe”.

Austria’s HYPO NOE could also be a candidate for a new issue this week after having mandated Deutsche Bank, DZ Bank, Erste Bank, RBI and UniCredit to update investors. A short dated, Eu500m issue is likely, The Covered Bond Report understands. A host of deals that have been mandated for several weeks are also in the pipeline.

BNP Paribas, Crédit Agricole, HSBC, Natixis, Société Générale and Royal Bank of Scotland launched the CRH issue this morning based on price talk of 120bp-125bp over mid-swaps, and are due to price the deal at 120bp over, according to a syndicate banker away from the leads.

He said that the order books were said to be oversubscribed after just over one hour. A syndicate official on the deal said that it will be sized at Eu1.4bn

Syndicate officials away from the leads suggested the transaction was yield driven, with pricing of 120bp over and 12 year swaps at 278bp allowing a 4% yield to be offered. They said that the pricing would incorporate a decent new issue premium, with one putting it at 15bp-20bp.

One complimented the issuer, saying it had made a sensible decision to not wait until November, when CBPP2 will be launched, as this would not have a material impact on execution risk for French deals, with peripheral euro-zone jurisdictions likely to benefit more.

Syndicate bankers reported some spread tightening and stabilisation of French covered bond spreads, but one said that the ECB’s announcement of CBPP2 had not led to any big secondary market moves.