The covered bond market was quiet this first working day of the second quarter, but conditions are conducive to benchmark issuance, according to syndicate officials, and some supply, possibly French, should hit the market although the week is shortened on account of Easter holidays.

The market is in stable condition, they said, with one noting that the backdrop for covered bonds is “absolutely fine” despite a slightly softer tone in equities on the back of a “marginally disappointing” outcome of talks on Friday about the euro-zone sovereign firewall system, and some retracing in Bunds earlier today.

“It’s OK, but not a great result, and only really covers Italy,” said the syndicate banker, adding that the week being short would influence supply volumes more than market conditions, which remain constructive.

“The market is certainly there for it, but deals would need to be in by Wednesday,” he said. “In general it will be fairly quiet.”

Euro-zone leaders on Friday morning set a ceiling of Eu700bn on the funds that can be jointly lent by the European Financial Stability Facility and the European Stability Mechanism, with RBS analysts saying that the increase in the size of the firewall was “ultimately much less than expected”.

In addition to Easter/spring holidays influencing activity, the European Central Bank and Bank of England are holding policy meetings on Wednesday and Thursday, respectively, with the US Federal Reserve due to release policy meeting minutes tomorrow (Tuesday) and US non-farm payrolls coming out on Friday.

A syndicate official said that some French supply could hit the market this week, but that this was not definite.

Another banker was confident there will be primary market supply this week given positive market conditions, saying that the market opened strongly this morning.

“I would definitely expect an announcement in the next 24 hours,” he said, “maybe later today or tomorrow morning.”

He said that the market is open for every jurisdiction, with peripheral spreads moving in the right direction after some widening last week, although peripheral issuers had to weigh the arbitrage between covered bonds and senior unsecured debt.

“The market opened with a strong tone, there is no paper around, and secondary spreads have been tightening for the last two to three sessions,” he said. “Deals are definitely possible, the question is which format, which maturity. There will be some action.”

Other syndicate bankers said they were not aware of any new issues being lined up, although one said that the market was stable and accessible for a wide range of issuers and jurisdictions.

“You can sell everything except for the weak Spanish and Italian names,” he said, adding that higher quality cédulas and OBG supply with a maturity of up to five years can be sold, with 10 year deals even a possibility for the likes of BBVA and Banco Santander.

He said that the market was quiet, and that he expected a maximum of two “surprise” transactions this week.