Market participants were cautiously optimistic today (Friday) about covered bond issuance next week, with a new European Central Bank covered bond purchase programme expected to start imminently after further details – although slim – were announced yesterday.

“It remains subject to market evolution, but we will see issuance next week and that CBPP2 will be up and running on Monday,” said a syndicate official.

The European Central Bank announced further details of its Eu40bn CBPP2 yesterday (Thursday). It gave no more detail regarding timing than to say that the programme would begin “in the course of November”, but market participants expect it to start very soon.

The criteria of the programme are looser than for CBPP1, with the main volume reference having been lowered from Eu500m to Eu300m, the key rating threshold from AA to BBB-, and a minimum maturity requirement having been removed. A spokesperson for the European Central Bank declined to give any further details regarding the timing or execution of the programme.

Some market participants were surprised and/or disappointed that no clarity was given as to whether the programme would be weighted towards helping peripheral countries that have found accessing the covered bond market – and bank funding in general – most difficult.

However, a syndicate official said although there had been few details released, a minimum rating of BBB- or equivalent was probably set with the idea of helping peripheral issuers in mind.

Vincent Hoarau, head of covered bond syndicate at Crédit Agricole CIB, said it was naive to have expected more details from the ECB.

“It happened the same way in 2009,” he said. “They’re releasing no proper detail on how this money will be allocated to the different covered bond jurisdictions; we will only get the information – if we get it – when it’s already trading.

“I can imagine that the allocation will be based on a kind of formula considering three things: the ECB paid-in capital share of the national central bank; the covered bond market size of that country; and hopefully the fact that some jurisdictions need more support than some others.”

Under CBPP1 the Eu60bn was split between national central banks according to the ECB capital key. This was not officially announced at the beginning of the programme, but became known after comments from a central bank official, and became clear through activity under the programme.

Syndicate officials expect euro benchmark issuance next week, but one cautioned that there would be none early on Monday morning.

“There’s so much uncertainty in the market that it will take some time to recover,” he said.

The banker said he expected a German issuer to be the first to enter the market next week. Another syndicate official said he hoped a German issuer would be the first on the market on Monday or Tuesday, suggesting NordLB and Münchener Hypothekenbank as possible candidates.

Bayerische Landesbank has also been in the pipeline, but a banker from one of the leads said the issuer had no plans to enter the market next week, adding that it would be reassessing conditions.

He said he expected the market to be open to everyone next week – core and non-core – because of CBPP2.

“If we see non-core, it won’t necessarily be one of the small cajas, but it might be a strong Spanish name,” he said. “After three or four months of waiting, it’s high time for them to act.”