An increase to a 10 year Land Hessen bond constituted the only primary market activity in the top end of the euro market this (Monday) morning, with conditions still too unsettled to entice covered bond issuers.

Euro issuance was therefore on hold, according to a syndicate official, who said the market was hard to predict.

“This morning felt better after we ended on a more constructive note on Friday,” he said, “but then it’s been more volatile in the last couple hours. I’m not aware of anything imminent that could pop on screen tomorrow.”

Another syndicate banker said that the week had got off to a quiet start, and that the main question was whether market participants could “trust the calm”. An auction of five year Italian government bonds was “OK”, he said, although at 6.29% the yield indicated “anything but recovery levels”.

Mario Monti replaced Silvio Berlusconi as Italy’s prime minister yesterday (Sunday), albeit in a designate role.

Peripheral government bonds had opened fairly strongly, added the syndicate banker, with French levels also tighter than on Friday.

Another banker said that while conditions were not that bad they were far from bullish. He said that he was not aware of any covered bond issuers eager to tap the market, and another syndicate banker said that if any issuers had wanted to launch deals today they would have already made their moves.

“We have the unchanged situation that many investors are unsettled,” he said. “Though the ECB has started buying it is only one part of the puzzle and investors remain cautious.”

The ECB this morning reported that Eu11m of purchases had settled as of Friday under its second covered bond purchase programme (CBPP2). The central bank will be reporting on a daily basis purchases that have settled as of the previous working day, an ECB spokesperson told The Covered Bond Report.

A syndicate official said the programme had gotten off to a slow start last week, with some buying of Pfandbriefe, and some Portuguese, Spanish, and Italian covered bonds.

“It’s been quite slow, but I’m sure it will pick up,” he said.

Another banker said the programme would follow the pattern of the 2009 programme, with central banks buying their own countries’ bonds.