US targeted dollar covered bond supply could pick up in the near term, according to syndicate officials, who said that spreads have held up comparatively well, and that the conclusion of the SEC’s review of an RBC filing for publicly registered covered bonds is keenly awaited.

The last dollar benchmark covered bond was a $2bn (Eu1.59bn) five year issue for Barclays, sold at 124bp over mid-swaps on 2 May. The deal took year-to-date supply, including taps, to $24.6bn, according to The Covered Bond Report’s database.

Canadian banks, which have accounted for half of this year’s issuance, have been absent from the market since the middle of March in anticipation of the announcement of covered bond legislation, including a prohibition upon the use of CMHC-insured mortgages as collateral. This was duly announced on 26 April, although the legislation has yet to come into force and a syndicate banker said he expects Canadian covered bond supply to hit the market before the ban on CMHC-insured mortgages in cover pools becomes effective.

Another syndicate official said that US dollar covered bond spreads, despite backing up from tights, have held up well versus senior unsecured levels in recent weeks, while another said that spreads have been “up, down, sideways”. He said that it remains to be seen whether this relative stability will translate into aggressive pricing levels, and that elevated concessions are still likely to be necessary.

This could be tested in the near term, as syndicate officials expected some supply in that timeframe, with one referring to one or two deals being “slated” and other, opportunistic deals also possible.

“People are sitting and watching, but you could see stuff sooner rather than later,” said one.

But bankers’ expectations for volumes appeared modest, as they cited a bias toward a “wait and see” approach and the influence of the euro-zone debt crisis on US sentiment toward any deals from the region.

The rolling off in June of some $60bn of bank debt issued under the Temporary Liquidity Guarantee Program (TLGP) means there is scope for some of the funds that will be released to go to covered bonds, said a syndicate official. Another said that any recycling of TLGP funds into covered bonds would be on a case-by-case basis and that while non-Canadian supply is a challenging prospect the maturing of TLGP debt could support demand for Australian, Scandinavian and/or Swiss deals. Government guarantees extended under the programme, which is operated by the Federal Deposit Insurance Corporation (FDIC), expire at the end of 2012.

Meanwhile, market participants are also waiting for the Securities & Exchange Commission to conclude and declare effective a Form F-3 filing by Royal Bank of Canada for the issuance of fully registered covered bonds, which would be a first in the US. (Click here for an overview of previous coverage.)

The form was filed on 18 May, and though there is no statutory limit on the length of the review period, The Covered Bond Report understands that the SEC will try to respond within 30 days.