France’s Caisse de Refinancement de l’Habitat could launch the first benchmark covered bond of the year tomorrow (Friday), after this afternoon having become the first issuer to announce officially a mandate in the new year, with a 12 year deal planned.

The last euro benchmark covered bond issuance was on 6 December, when National Australia Bank sold a Eu1bn 10 year transaction and Société Générale SFH a Eu1.5bn five year.

CRH said today (Thursday) that it will launch a 12 year euro benchmark in the near future, subject to market conditions. Barclays, BNP Paribas, Crédit Agricole, Deutsche, Natixis and SG are bookrunners.

CRH’s last new benchmark was a Eu1.75bn March 2024 deal launched on 27 February last year, which was tapped by Eu750m on 14 June.

The 2024 paper was quoted at 42bp mid over mid-swaps today, with CRH October 2023s at 41bp over. CM-CIC January 2024s were at 42bp over and Crédit Agricole July 2025s at 44bp over.

Activity in the covered bond market has otherwise been thin compared with the senior unsecured market and with the level of covered bond issuance at the beginning of last year, when seven deals hit the market in the first two days of business.

Market participants said that the lower covered bond issuance reflected the positive reopening of the markets, especially after the agreement on the US “fiscal cliff”, which has allowed issuers to choose alternative funding instruments such as senior unsecured, with three such trades launched this (Thursday) morning by BBVA, BNP Paribas, and Société Générale.

“This is not surprise to me,” said a syndicate banker. “Covered bonds are a good product when the market is looking difficult. With spreads being so tight, and issuers being worried about asset encumbrance, they will go for senior unsecured.”

A “quite good risk-on sentiment” also prompted issuers that would in the past opted for secured transactions to prefer unsecured ones, said another syndicate banker.

“BNP was the traditional opener of the covered bond market in recent years, but they are out with a five year senior unsecured deal, which is going well,” he said. “SocGen is out with a two year floater, and BBVA with a five year trade that collected an order book that was reported to be around Eu4bn.”

As long as the risk-on mood lasts, the syndicate banker expects activity to continue on the senior unsecured side, with further covered bond issuance being more skewed towards the middle to end of January, when LTRO redemptions can be made and issuers receive some collateral back, potentially giving them some more flexibility with regard to secured funding.

Several market participants forecast peripheral countries to issue covered bonds later this month on the back of viable spread levels.

“The first bank transaction of the year was from BBVA,” said a syndicate banker. “If the market is open for senior unsecured transactions from peripheral countries, we are able to expect covered bonds from this region.”

He said that one issuer from the “Iberian peninsula” had already filed a request for pricing.

According to the syndicate banker, Spanish and Portuguese will launch deals with maturities no longer than five years, while more solid Italian issuers may also opt for five or seven year trades.

Another syndicate banker said that it is difficult to pin down names, as the market is open for any transaction.

“If you need a good January, this is a good January, so any issuer would actually be able to issue,” he said.

Besides the improved market conditions, a syndicate banker also cited a change in attitude as a reason for lower activity on the covered bond side.

“It is more a step by step approach these days as the pipeline builds up,” he said. “It’s not like in the past, when many issuers where queuing to issue and the pipeline was about to burst”