For the first time in four weeks a Monday has failed to produce a new covered bond benchmark and, despite market conditions remaining strong, issuance may very well be over for the year, said bankers today, with political uncertainty in Italy a contributing factor.

Mario Monti, Italian prime minister

For the past three weeks here has been a new issue in the market every Monday – Belfius Bank was out with a Eu1.25bn five year on 19 November, BBVA and Münchener Hypothenbank brought Eu2.5bn of supply in aggregate the week after, and last Monday Belfius’s Belgian peer KBC Bank kicked off December issuance with a Eu1.25bn five year deal.

New issues from Société Générale Home Loan SFH and National Australia Bank on Thursday could be the last benchmarks of 2012, however, according to bankers. They said that this is the last week of the year which an issuer would come to market in if it wanted to, but that there are no deals in the pipeline from their vantage point. However, they said they would not exclude the possibility of an opportunistic transaction being launched at short notice.

“I don’t want to say we’re done and dusted for the year, but I would be pretty surprised if anything came out,” said one.

Market conditions are not standing in the way of a deal being launched, however, at least from a core jurisdiction, according to bankers. News that Italian prime minister Mario Monti has decided to resign, earlier than expected, has injected some volatility into the market and triggered a widening of government bonds, but the impact on covered bond spreads has been relatively modest and the overall market reaction fairly “reasonable”, they said.

A syndicate official said that issuance conditions are unlikely to improve much in early January, but that market activity will nonetheless start to slow down towards the end of the week in preparation for the holiday season.

“So why not print now and avoid the January rush with expected SSA supply competing on valuation?” he said.

Another acknowledged that the uncertainty about the political situation in Italy may have accelerated a sense of closure for the year, and one said it served as a counterargument to the case for issuing still this year as opposed to waiting until January.

That is based on the advantages seen in not having to “queue up” and face competing supply, with the Italian situation also showing that there are still problems to be dealt with there, said one banker, while another suggested there was little reason to worry about putting off issuance until the new year.

Spreads are still likely to grind tighter given a lack of supply, he said, with signs of progress in fiscal cliff negotiations in the US also suggesting there is less need to fear developments in that context.