Sentiment “soured” by US non-farm payrolls and sovereign stress, combined with holiday-related absences and blackouts, point to a quiet week in euro covered bonds, according to market participants, with any hopes of OBG supply dashed by BTP widening.

A syndicate official said he doubted issuers would come to market this week, although this was difficult to predict.

“I’m certainly not holding any mandates,” he said. “It’s difficult to say, but this could be another week of nothing.”

Mario Monti, Italian prime minister

He noted that the market was still getting its head around disappointing US non-farm payrolls released on Friday.

Another syndicate official said the reaction to these numbers came today (Tuesday), the first working day after the Easter holiday.

“We were off Friday and Monday, so we didn’t price these numbers in until today,” he said. “Indices are a bit wider as a result.”

A syndicate banker said the market was “definitely sour”, and that issuers would not want to move in this market backdrop when not every investor is back from holidays.

“We also have this blackout period coming up in a couple weeks, so we may have a couple weeks of quiet,” he added. “But there’s no reason for that to harm the market.

“Having a couple weeks of quiet is not anything that makes us nervous. We have seen these periods of quiet before, and it’s still early in the year.”

Syndicate officials noted that European government spreads were a bit weaker today, with peripheral spreads significantly wider.

According to one, Spanish Bonos had widened about 10bp from last week, while Italian BTPs had widened almost 55bp, “killing all hopes” an Italian issuer might come to the market after no issuance from that jurisdiction this year.

“It seems for the time being the market would need to change quite substantially from where it is,” he said.

A syndicate banker said before the Easter break market participants were “crossing their fingers” for issuance out of Italy, but now those hopes had been dashed.

“It’s really tough with these headlines,” he said.

He added that the market was “nasty” today.

“What we need now is a good core name, and we need to find an issuer who wants to do something now,” he said. “I think you’ll still find that issuers are in this comfort zone where they don’t need to do anything.”

Another syndicate banker said that while the market seemed dead at the moment, issuers might look at the market if it opens in the next few days.

“Sometimes when the market starts to turn people want to issue before it gets worse,” he said.