Market participants expect a slimmer pipeline after two weeks of heavy supply, but issuers including BNZ International and Sparebanken Vest have announced mandates and bankers were even hopeful this (Friday) morning that a Spanish benchmark could emerge after a successful government auction.

“It’s been a pretty decent week all around, with indices performing again and good issuance” said a syndicate official. “We’ve had a nice bit of digestion the last two days, and I think we’re seeing the market settle somewhat from here on in.”

A syndicate official said most issues from this week offered a new issue concession of 10bp-20bp and were 1 to 1.5 times oversubscribed.

“With the bullish tone in the sovereign space, we expect a healthy pipeline,” he said. “The next step is to see if we can move towards issuance from regions outside of France, Scandinavia, Canada and Australia.

“Spanish and Italian covered bonds can’t be that far away from hitting the screens,” he added.

Banco Bilbao Vizcaya Argentaria and Santander were seen to be the most obvious candidates for any Spanish issue.

“The Spanish auction went very well, and we’re seeing more demand for cédulas, so maybe we will see something,” said a syndicate official.

Spain raised almost twice the maximum size it had targeted in a Bonos auction on Thursday morning.

“I think it doesn’t look too bad for Spain to be honest,” said a banker.

Spanish covered bonds were trading at around 40bp over Spanish Bonos for the best names, he said, compared with Italian covered bonds that were trading flat to the sovereign.

Another syndicate official said the positive auction had shaken up the relationship between Bonos and cédulas, making cédulas issuance more feasible in the future.

“But then maybe it’s just wishful thinking,” he added. “Anything beyond a three year for a Spanish issue would be very challenging.

“The buying base is still very tentative outside Spain for these deals.”

Another banker said that it would send a strong signal to shareholders and banking authorities if peripheral banks could tap the market, “even if the initial deal will involve spreads at 300bp or so”.

Sparebanken Vest Boligkreditt has mandated Commerzbank, DZ Bank, ING and Nordea Markets for a roadshow to run through the week of 23 January.

“We are prepared to print a covered bond if the market allows,” Egil Mokleiv, managing director at Sparebanken Vest Boligkreditt, told The Covered Bond Report.

“Up until now we have done two public Eu500m issues out of our Eu5bn programme,” he said.

The issuer relies more on the domestic market and on Wednesday issued a Nkr500m 15 year (Eu65m) deal. Mokleiv said the group uses covered bonds for long dated funding, so its upcoming euro covered bond is likely to have a maturity of five years or longer.

BNZ International Funding has mandated DZ Bank, JP Morgan, National Australia Bank, Natixis, RBS and UniCredit for a euro issue. The New Zealand bank’s Australian parent, NAB, sold a debut, Eu1bn five year covered bond at 100bp over mid-swaps last week, and BNZ is expected to hit the market next week.

Commonwealth Bank of Australia plans to sell an Aussie dollar denominated covered bond via leads CBA, Citibank, HSBC and Westpac. A syndicate official suggested that the leads might look closely at the Australian RMBS market for pricing.

“The RMBS market will be a better comparison for them than euros,” he said.

There has also been some speculation about a Pfandbrief issuer coming to the market.

“It seems relatively quiet in terms of the pipeline compared to last week,” he said. “If you haven’t got the peripheral market open, then it does reduce supply.”

BPCE SFH yesterday (Thursday) added Eu850m to an outstanding Eu400m March 2022 issue. Leads Barclays Capital, Natixis, NordLB and UBS set the spread at 175bp over mid-swaps, in line with the initial guidance.

The books were in excess of Eu900m at closing, with 36 investors participating. The issuer had been aiming to take the Eu400m deal to a benchmark size.

“We only opened books for two hours,” said a syndicate official at one of the leads.

The tap traded this morning at 172bp over.

“France took most of the trade,” said the syndicate official, “and insurance companies also the vast majority.”

France was allocated 54%, Germany 42%, and other 4%. Insurance companies took 76%, central banks 11%, asset managers 8%, banks 4%, and others 1%.

Barclays Bank was in the market today (Friday) with a self-led sterling denominated £200m (Eu240m) three year floating rate covered bond, after having sold a £1bn 10 year benchmark last week.