Caisse Française de Financement Local and UniCredit Bank Austria are seen as candidates for new benchmark covered bonds this week, with a reasonable tone to the market reported this (Monday) morning after last week’s challenges and macro events later this week.

Deals for Crédit Mutuel Arkéa, CRH and Münchener Hypothekenbank last week showed the new market environment to be challenging last week and ECB and Bank of England announcements on Thursday as well as US non-farm payrolls on Friday are expected to mean that any new supply comes in the first three days of the week, said a syndicate banker.

“Generically the market is feeling OK,” he said. “We are green in equities and the market is going the right way.”

Caffil, the Dexia Municipal Agency successor, completed a roadshow on Friday and the issuer is now taking feedback and considering its options, according to a banker at one of its leads – Barclays, BNP Paribas, Deutsche, HSBC and Natixis.

A syndicate official away from the deal said that should the issuer, as expected, follow up on its roadshow with a deal it will now be faced with a wider level than it had been anticipating a couple of weeks ago.

“After the misfortunes of last week a substantial new issue premium will be necessary,” he said.

He suggested that Caffil would have to start off with a new issue premium of 5bp-10bp over old Dexia MA paper, which would put it some 15bp wide of OATs. He said that an old Dexia MA 2022 issue was at around 42bp over mid-swaps and a 2024 at 45.5bp over, although noted that these are old issues. Meanwhile the May 2023 OAT was at 34.5bp over mid-swaps, he added.

“I’d be surprised if it’s tighter than 50bp over,” he said.

UniCredit Bank Austria was mentioned as another potential issuer for this week. The bank received a first, Aaa rating in relation to its mortgage cover pool on 3 June and in a presentation on 5 June said in a presentation that a benchmark mortgage Pfandbrief was planned for the first half of the year, with a public sector Pfandbrief in the second half. Although the second half began today, the announcement could signal a pre-summer transaction.

Another syndicate banker noted that there is still room for deals as the summer has not started yet, even if the holiday season for the Nordics is now in full swing.

He suggested that in the new rates environment issuers and leads should look anew at the neglected three to five year part of the curve.

“Ten to fifteen years is not the sweet spot,” he said.

Meanwhile Natixis and UniCredit have been mandated to hold a credit roadshow for La Banque Postale, which has been working on a mortgage covered bond programme. A banker said that the roadshow is not deal-specific but the French issuer would be visiting covered bond investors.