With nine euro benchmarks totalling Eu13.75bn absorbed in the past three days, market participants have been expressing relief that sentiment has held up and were today (Friday) hoping that the market remains supportive into next week, with more issuers waiting in the wings.

“Fingers crossed that it continues,” said a covered bond syndicate official. “It would be a super result if it carries on like this.”

He said that although issuance had been heavy, the greatest threat to sentiment this week had been not fears over covered bond oversupply but the possibility of hiccups in the sovereign/supra market. A Eu3bn three year deal for the European Financial Stability Facility was seen as a potential banana skin for the market, he said, but this, as well as a Bank Nederlandse Gemeenten euro benchmark and a KfW dollar benchmark, were well absorbed.

“People will continue to watch the whole European story,” he added.

OAT yields were higher on a French auction yesterday (Thursday) and negative news about the Spanish economy failed to derail the market, but another syndicate official cautioned that, as in 2011, events could change direction quickly.

“There haven’t had any sovereign rating rumours for some time, nor weekend emergency meetings, either,” he said. “Beware of the Friday afternoon rumour mill.”

Another syndicate official said issuers this week had all come to the market with a very pragmatic approach when it came to pricing.

“There was no quibbling over a couple of basis points,” he said. “And NAB was the only deal that didn’t get upsized.”

A banker was confident that investors still had cash to put to work, with cash balances at insurance companies remaining strong.

Further French supply is expected next week after a combined Eu4.75bn of 10 year issuance from Caisse de Refinancement de l’Habitat, Crédit Agricole Home Loan SFH and Société Générale SFH this week, with Compagnie de Financement Foncier cited as a likely candidate.

ANZ

ANZ is set to launch the third Australian euro benchmark covered bond next week after Commonwealth Bank of Australia and then National Australia Bank issued five year euro debuts this week. The issuer mandated Barclays Capital, Natixis, UBS and UniCredit in late December and was said to have even looked at accessing the market this week after CBA.

A banker said that ANZ could launch a 10 year benchmark. He said that CBA had toyed with the idea of a 10 year, too, but ultimately chosen its five year maturity. He said that the availability of French 10 year paper offering yields of 4% made it challenging for issuers from tighter jurisdictions to compete for investors’ attention at the long end.

“I think Eu1bn would be difficult in 10 years for an Australian,” he said.

Compared with pricing of 100bp over for the two Australian five year benchmarks this week, he suggested 125bp over mid-swaps would be a good starting point for guidance on a 10 year Australian benchmark.

NAB yesterday priced its Eu1bn five year issue at the same 100bp over that CBA had achieved a day earlier. NAB’s paper was trading a couple of basis points tighter this (Friday) morning, according to a syndicate official at one of the leads, which were Credit Suisse, Deutsche Bank, JP Morgan and NAB.

“We got the result we wanted,” he said.

He said that a few German accounts had expressed a reluctance to be involved in a five year NAB trade so soon after buying CBA, but that they had ultimately participated, albeit with smaller tickets. He said that this contributed to a granular order book.

SNS Bank is seen as a strong candidate for issuance next week. The Dutch issuer roadshowed in December and considered issuing this week, but held off. DZ Bank, Natixis, Rabobank and RBS have the mandate.

A banker at one of the leads said the issuer had been looking this week, but realised it did not make sense to move.

“We are revisiting the case next week,” he said.

A syndicate official away from the leads suggested that an SNS deal would be tricky, and said it was therefore appropriate for the issuer and leads to hold off until they are sure of getting a deal away. He said that he is expecting a short five year maturity and said that a level of 145bp-150bp would be appropriate.