Raiffeisenlandesbank Niederösterreich-Wien this (Tuesday) morning postponed a roadshow that was due to start on Thursday, citing the turn in market sentiment, with chances of a restart to primary market covered bond activity still seen as low in the wake of tapering fears.

Chairman Ben Bernanke

The Austrian issuer said that due to its strong liquidity position and to the recent worsening of market conditions, it made the decision to postpone its series of investor meetings. It said it intends to return to the market with the project at a later date.

RLB NÖ-Wien had announced its roadshow plans last Tuesday (18 June), in the middle of three days of issuance before US Federal Reserve chairman Ben Bernanke indicated the beginning of the end of quantitative easing, a move which threw markets off balance.

Markets have remained volatile into this week, further spooked by concerns about Chinese growth, but were more stable this morning.

“Everybody is adjusting to the new world in terms of rates,” said a syndicate banker, “and before we see some stabilisation I wouldn’t expect to see much happening.

“We have seen some selective buying from buy and hold accounts looking for the new higher yields at the long end, but have not seen a bottom emerging yet.”

Another syndicate official, who cited some buying of core paper at the short and long end, said that investors now have the higher yields that they have been seeking, but “don’t want to catch a falling knife”.

Another asked: “Do they want to engage now or wait another week to get 2% in 10 year Bunds?”

Some bankers were nevertheless hopeful that European markets can decouple somewhat from the US, given the different macroeconomic outlooks.

In spite of RLB NÖ-Wien’s move, core issuers are said to be keeping an open mind about opportunities, although an analyst said: “It seems issuers want to wait for the dust to settle before they enter the market again – a sensible approach in our view.”

Bankers are also optimistic that some fundamental factors can sustain primary market activity, not least strongly negative net supply, with further redemptions supportive of buying interest.