Deutsche Hypothekenbank has mandated for a seven year mortgage Pfandbrief that is expected to be launched tomorrow (Tuesday), with the covered bond pipeline otherwise thin amid a muted start to the week. NAB raised $1.5bn in a tap and new FRN on Thursday.

The only FIG supply in the market today is a two year senior unsecured benchmark for Spain’s Banco Bilbao Vizcaya Argentaria that will be priced at 325bp over mid-swaps, in line with guidance, via BBVA, Commerzbank, Credit Suisse, JP Morgan and Natixis.

A syndicate official noted that although the euphoria that followed announcements of the ECB’s sovereign bond buying programme and further quantitative easing by the Federal Reserve had already began to fade last week, primary market activity had continued to be strong, but that this may be changing.

“With the fading in bullishness it seems we are getting tired of the strong momentum in recent weeks and reality is catching up,” he said. “New catalysts are required to support an ongoing rally.”

Syndicate bankers said markets opened weaker this morning, and that the pipeline looked thin, with a few events scheduled for this week that market participants will be focussing on, such as the release on Friday of results from a stress test of Spanish banks and a new structural reform programme for the country.

A syndicate official said that positive sentiment last week spurred some secondary market switching into riskier assets, but that market behaviour seemed more cautious so far this week.

“The market isn’t as euphoric as it was a couple of weeks ago,” he said.

However, another syndicate banker said he had heard anecdotal evidence of some market participants lightening up positions in anticipation of new issuance, and that core paper had been underperforming.

Deutsche Hypo has mandated BayernLB, DekaBank, DZ bank, NordLB and UniCredit to lead manage a Eu500m no-grow seven year mortgage Pfandbrief that is expected to hit the market tomorrow.

A new issue with that maturity would be the bank’s longest dated covered bond, according to a syndicate official away from the leads. He said that June 2017s were trading at 1bp through mid-swaps, and a May 2016 at around 4bp through.

The issuer last came to the market at the beginning of August with a Eu250m tap of its June 2017s to take the total deal size to Eu750m.

National Australia Bank sold $1.5bn (Eu1.16bn/A$1.43bn) of covered bonds on Thursday, increasing a 2017 fixed rate issue by $1.25bn and adding a new, $250m five year floating rate note.

The fixed rate tranche was sold at 78.9bp over US Treasuries, equivalent to mid-swaps plus 72bp following guidance of 72bp-74bp over. The pricing compares with a spread of 100bp over when the deal was first launched in mid-June for $1.25bn. The floating rate note was priced at 72bp over Libor.

Citigroup, National Australia Bank and TD Securities were joint leads.

A syndicate banker away from the leads said the large size of the tap demonstrates the strength of the triple-A market, and covered bonds in particular, and that demand is strong while supply lacking.