The senior unsecured market has enjoyed a burst of issuance since reopening last week, with a total of Eu15.25bn spread over 13 issues, and covered bond market participants welcomed the development, even if it might provide more competition than in the second half of 2011.

The senior unsecured trades also generally tightened by about 15bp last week, according to a covered bond syndicate manager.

“I think everyone in the market is surprised to see so many deals,” he said. “It started with the better names and now we see names like Crédit Mutuel Arkea.”

A covered bond analyst said senior has been outperforming covered bonds quite significantly.

“Generally, it has been surprising that the market has been as active as it has,” he said.

But other bankers said a reopening had been anticipated.

“It was pretty obvious at the end of last year that investors would again find confidence in senior unsecured,” said Vincent Hoarau, head of covered bond syndicate at Crédit Agricole. “Slowly the tone is improving.”

Frank Will, head of covered bond research at Royal Bank of Scotland, said that the activity in the senior unsecured market is positive and reflects reduced concerns about liquidity due to the strong take-up of the first of two three year ECB long term repo operations on 21 December.

“One of the biggest worries heading into this year was about banks’ funding access,” he said, “but an injection of about Eu190bn of net liquidity from the ECB and another unlimited LTRO at the end of February, where banks can fill up on funding at 1%, has calmed market fears.

“In light of this, it would be a bank treasury’s own fault if it has funding problems now.”

Dhiren Shah, covered bond and SSA syndicate, Credit Suisse, also said the state of the senior market was positive for bank funding in general.

“Personally, I think it’s great that the senior market has opened,” said Shah. “It’s fantastic for the market and sends a positive signal to international investors.”

He was also hopeful that dollar covered bonds could be launched on the back of dollar issuance in the senior market. Rabobank launched a five year dollar denominated senior unsecured deal yesterday (Wednesday), which Shah said went extremely well.

DNB and UBS yesterday tapped the senior unsecured market after launching benchmark covered bonds last week.

“It seems that for some issuers now that covered bonds have been done senior deals can come,” said Armin Peter, head of covered bond business and syndicate at UBS

Nordea and ABN Amro, meanwhile, tapped the senior unsecured market before issuing covered bonds.

Hoarau at Crédit Agricole CIB said if the senior market continues to improve it might lead to more issuers preferring funding in the senior market as long as covered bonds remain at the levels they are now.

“My guess is that the senior market will continue to grow, but it will take some time,” he said.

Lorenz Altenburg, head of covered bond syndicate at Nomura, said every issuer needs a good mixture of senior and covered, so having the senior option available was good for the overall market.

“If we can get some more senior done, maybe we can move on to the next big step and get some covereds done from non-core jurisdictions,” he said.