The reopening of the covered bond market could be slowed and then subdued with issuers considering and then potentially launching senior unsecured deals to take advantage of benign market conditions, syndicate officials said today (Wednesday), as the year got off to a slow start.

With some Asian markets still closed and some issuers and investors still on holiday today was a quiet day for trading, said syndicate bankers. However, issuers were said to be evaluating opportunities.

“There is a lot of recalling issuers, refreshing pricing, seeing how the market is”, said a syndicate banker. “I think this is a lot more admin-oriented for the issuers,” he added.

The first month of the year is set to be less frenetic than in 2012, bankers agreed.

“This year January will be slightly below average in terms of issuance activity, but it will not be an exceptionally quiet January,” said one syndicate banker.

This is because, after being particularly active at the end of last year, issuers are in less need of funding, he said. A syndicate banker also noted a slowdown in the growth of eligible collateral in many jurisdictions as a factor impacting covered bond issuance.

“The pressure on the asset side is not as big as it was last year,” he said.

“However, there are a few candidates eyeing at the market out there, a couple of French names or at least one German name,” he added. “It’s a bit tricky to play with names, but I’m pretty sure we will see one of these trades already this week, although focused more on the senior unsecured side, and then the covered side in the second week of January.”

Another banker suggested that a potentially favourable senior unsecured market could delay the opening of the covered bond market as issuers consider whether to opt for an unsecured deal first and thus potentially also possibly dampen issuance volumes.

One syndicate official noted that the US Fiscal Cliff deal had lifted markets this morning, but said it was too early to tell whether this would translate into more issuers opting for senior unsecured trades.

Peripheral issuers were considered to be in a promising position to come to market, if not this week then in the coming weeks. Indeed a Portuguese covered bond comeback this month is considered a given.

“It’s an open secret that there will be at least one Portuguese issuer trying to access the covered bond market earlier in January,” said a syndicate banker.

Portuguese issuers who placed senior unsecured deals last year, Caixa Geral de Depósitos and Banco Espiríto Santo, may be looking at the covered bond market next week, according to another.

“Spreads have tightened a lot in the senior unsecured trade, Portuguese govvies have rallied, so the market may be starting to look a little bit more interesting for them,” he added.

Portuguese covered bonds are expected to be well received, as were the two Irish transactions at the end of last year, and as with the Irish issuers, a shorter maturity will be preferred, said a syndicate banker.

Other peripheral countries also appear well positioned to have good access to the market, with Spain and Italy being significantly tighter today, according to another.

“Some of the peripherals may look at the market closely in the covered bond space,” said a syndicate banker, “but there is that question mark of where senior unsecured will come relative to a covered bond, so what the issuers will be doing this week is evaluating both senior and covered and then take a decision based on that because the market is in a very good shape.”