Market participants said this (Friday) morning that they expect little covered bond issuance next week, variously citing blackouts, a tightening of the secondary market, and an open senior unsecured market. Sparebanken Vest Boligkreditt finishes a roadshow today.

“The market is there but no one is willing to come,” said a syndicate official.

Another said that most issuers have already launched deals in the first wave of supply, with the exception of just a few, such as BNP Paribas and OP Mortgage Bank. Benchmark euro covered bond issuance has been Eu25.9bn this year, according to RBS analysts.

“It wouldn’t make sense for all these issuers to come again within 10 business days,” said the syndicate official.

“Many issuers are in blackout or silent periods,” he added, “so it may all re-materialise as soon as the reporting session is over.”

A banker also said that the impact of blackouts should not to be underestimated. He said that a strong performance of the secondary market was another factor holding back issuers.

“We have seen a 10bp-15bp tightening in the last couple of weeks, and I think issuers really want to follow that through,” he said. “If you’re sitting there as an issuer and you’re seeing these LTROs adding liquidity to the market, no macroeconomic news, and continued tightening, you want to wait and follow that.”

He added that such a move could be dangerous because eventually there would be negative macroeconomic news, and “history has taught us spreads will not continue to tighten forever”.

Another syndicate official suggested a spate of senior unsecured issues might be having an effect. Yesterday (Thursday) Lloyds launched a Eu1.5bn five year senior deal at 305bp over mid-swaps that tightened about 15bp-20bp, according to the banker, and Swedbank came to the market with a Eu1bn five year senior at 183bp over after tightening from guidance of the 190bp area.

“I would say that the strength of rally we have seen this week may point people down the senior unsecured route,” he said. “If this window remains open then a few issuers might want to go down the senior unsecured track.

“Internally, with each institution and its funding profile, it makes sense to take advantage of the senior unsecured market, and save covered bonds for a rainy day.”

Other market participants said senior unsecured issuance was unlikely to affect covered bond supply.

“Lloyds had done covered bonds previously,” he said, “and Swedbank have access to a strong domestic covered bond market that is more attractive to them than the euro covered bond market. I don’t think anyone has dropped a covered bond issue because of senior unsecured.”

Sparebanken Vest Boligkreditt is finishing a roadshow today with leads Commerzbank, DZ Bank, ING and Nordea Markets.

“When we are done and dusted, the roadshow needs to be digested and then we will be ready to go,” said a syndicate official at one of the leads. “We want to take advantage of the positive market.”

He said it was too early to be considering size, maturity or pricing.

A syndicate official away from the leads suggested a level of the high 60s to 70bp over would be appropriate for a five year deal.

“I don’t think it needs to be that much back of SpareBank 1,” he said.

SpareBank 1 Boligkreditt sold a Eu1.25bn seven year benchmark at 77bp over mid-swaps on Tuesday.

Another syndicate official away from the leads said he would put the Sparebanken Vest Boligkreditt in the context of a Terra BoligKreditt issue, and wider than a DNB Boligkreditt.

“It depends on the feedback of the investors during the roadshow,” he said, adding that it was likely to be a medium term maturity and around Eu500m.