Leads on a mandated five year US dollar Westpac inaugural covered bond are said to be discussing the timing of a potential deal, with the issuer having late last night announced that it intended to tap the market as early as today, but conditions giving it pause for thought.

The market backdrop is not encouraging, according to Europe-based syndicate officials, who described it as ‘brutal’ and ‘ugly’.

Barclays Capital, Bank of America Merrill Lynch and Nomura, alongside Westpac, are understood to have been mandated as bookrunners on a Westpac 144A/Reg S deal. A syndicate official close to the issue said that there was clearly interest in a deal, but that a difficult market backdrop this (Thursday) morning meant the timing of a transaction was uncertain. He said the leads wanted to be sure of good traction before proceeding with a deal.

He said that there were some signs of the market reacting positively to an announcement from Germany’s chancellor Angela Merkel, but conditions are said to be very volatile.

A Commonwealth Bank of Australia euro covered bond is still in the pipeline, with a syndicate official at one of the leads – BNP Paribas, CBA, HSBC, and RBS – saying that some investors are still doing credit work and that a “horrific” market backdrop was not the right kind for an inaugural deal.

“It’s pretty ugly,” he said, although secondary market conditions in covered bonds were not so “horrendous”.

“Everything’s all over the place,” he said. “The volatility is insane.”

An auction of Spanish government bonds did not go well this morning, noted syndicate officials, failing to reach the targeted size.