Market participants warned against expecting a deluge of covered bond supply next week in spite of yesterday’s market-wide rally holding up this (Friday) morning, although the improvement in sentiment was marked by the first Spanish senior unsecured benchmark since May.

UniCredit Bank Austria this morning launched the first new euro benchmark covered bond since Wednesday night’s agreement on a package of measures to ease the euro-zone debt crisis, a Eu500m five year public sector Pfandbrief, after France’s BPCE SFH tapped a September 2021 issue for Eu750m yesterday (Thursday).

Recently roadshowed credits such as The Co-Operative Bank are considered possible candidates for issuance next week and a Dutch issuer is said to be considering a three to five year transaction, but market participants were not expecting heavy supply.

“We don’t expect an explosion of issuance,” said a fund manager in Frankfurt. “We haven’t heard of any other concrete plans.

“However, it is the beginning of November next week,” he added, “and I guess the ECB purchase programme will give leeway for further projects.”

A syndicate official said that many market participants could wait for further details of the programme to emerge on Thursday after a meeting of the Governing Council of the ECB, and another recommended that peripheral issuers hold off issuing until then.

However, he said the time was right for other issuers to tap the market.

“You’ve got to think that if anyone wants to do a deal, prefunding or whatever, they’d hit this market,” he said. “This is the best market really we’ve seen in a long time and a perfect platform if you are not a marginal issuer.”

A public holiday in France on Tuesday could stymie issuance in the early part of the week, suggested the other syndicate official, possibly putting back issuance until mid-week.

“And will the rally hold until Wednesday?” he asked. “That feels like a long time away.”

Further impeding activity could be an FOMC meeting and Nonfarm Payrolls next Friday.

So far the main beneficiary of the rally has arguably been Spain’s Banco Bilbao Vizcaya Argentaria, which today launched a 18 month fixed rate senior unsecured issue via BBVA, Citi and Goldman Sachs. The deal was said to have attracted more than Eu750m of demand by late morning at guidance of 250bp-260bp over mid-swaps, which a syndicate official away from the leads said was about 30bp wide of secondaries.

The last senior unsecured deal from a Spanish bank was a four year Santander issue a the beginning of May and the last Spanish covered bond benchmark was a Eu1bn five year for Santander on 31 May.

“It’s healthy for the overall market to see the Spanish coming out and doing something,” said the syndicate official.

UniCredit Bank Austria took indications of interest yesterday afternoon for its five year public sector Pfandbrief at the mid to high 80s over mid-swaps, before going out with official guidance of 85bp-88bp over this morning through leads Danske, DZ, Erste, NordLB and UniCredit. The deal is being priced at 85bp over mid-swaps and sized at Eu500m, after the leads had announced a Eu500m minimum size and built a book of close to Eu600m.

The Austrian deal comes after a difficult Eu500m four year mortgage Pfandbrief for Germany’s UniCredit Bank AG at the end of September and a successful Eu1bn 10 year OBG for UniCredit at the end of August. A syndicate official away from the leads put the new issue somewhere in the middle.

“It doesn’t look that exciting,” he said. “If I were an investor, I don’t know how I’d price it. You’ve got their Pfandbrief at plus 20bp and the OBGs at plus 300bp.”

The most recent Austrian benchmark was a Eu500m three year public sector backed deal for HYPO NOE Gruppe Bank two weeks ago, which was priced at 61bp over mid-swaps.

BPCE SFH yesterday sized the tap of a September 2021 issue at Eu750m after having gone out with a minimum size of Eu200m. Leads Barclays, BBVA, Credit Suisse and Natixis generated sufficient demand for the larger size and priced the issue at 125bp over mid-swaps, the middle of guidance.