A Eu1bn ANZ issue yesterday (Tuesday) could be the last euro benchmark covered bond of the week after the prospect of military action in Syria is said to have put off issuers that had been eyeing the market today, although fresh SSA and corporate supply was seen to be going well.

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Mounting pressure for military action against the Syrian regime took its toll on the broader market yesterday, although mainly in the latter stages of the trading session following the opening of the US market, with a syndicate official pointing out that it was only at this point that yields fell more aggressively and spreads started to widen.

However, syndicate officials said that the sell-off has not extended into today (Wednesday), with the broader market relatively stable and deals for the European Financial Stability Facility (EFSF), Finland and Sanofi going well.

“That makes me optimistic,” said one. “If the geo-political situation doesn’t deteriorate rapidly, the market is fine.”

Nonetheless, according to one syndicate banker at least a couple of covered bond issuers this morning decided against launching deals given the prospect of military action in Syria. Several syndicate bankers had yesterday morning said that they expected issuers to follow ANZ Banking Group into the market.

“The pipeline was there, but the possibility of military action is casting a shadow,” said one. “Tomorrow is the last chance this week, but I don’t necessarily think that the situation will look brighter then, and by Monday it may also not be much better.

“Issuers will wait and see if a window presents itself.”

Another syndicate banker said that the deals for EFSF and Finland were going very well, but that he did not expect much more supply this week.

Norway’s Sparebanken Vest Boligkreditt is on a roadshow this week while La Banque Postale has also been holding investor meetings. Public sector covered bond issuer Kommunekredit Austria has mandated for a roadshow starting next Wednesday (4 September) and could follow this up with a deal pending feedback and market conditions. ANZ’s New Zealand banking subsidiary has also mandated for a credit update roadshow, and a bond offering may follow.

For now, ANZ Banking Group has provided the only euro benchmark covered bond supply of the week, although it was in the market alongside what a syndicate banker said were seven other issuers across the corporate, FIG and SSA segments.

It priced a Eu1bn five year deal at 17bp over mid-swaps via ANZ, Barclays, BNP Paribas and UBS. Initial price thoughts were set at the mid to high teens, and guidance subsequently at the 17bp over area. A lead syndicate banker said ANZ’s deal is the tightest Australian euro covered bond to have hit the market so far.

A syndicate official away from the leads said it had not gone that well, and that the issuer had perhaps overestimated the strength of the market. He pointed out that Australian covered bonds are not ECB repo-eligible and have a higher risk weighting and said that “in difficult markets investors remember this”.

A syndicate banker on the deal suggested it needs to be viewed in the context of the broader market, with a Eu1.2bn order book and pricing at 17bp over “a good result” given how market conditions deteriorated over the course of the day, with equities down 2.5%-3% by the end of the execution process.

He put the new issue premium at around 4bp. Some 55 accounts were involved. Germany and Austria were allocated 44%, the UK 16%, Asia 9%, the Benelux 8%, Switzerland 8%, France 7%, and other Europe 8%.

Banks took 49%, fund managers 23%, central banks 13%, official institutions/SSAs 10%, insurance companies 3%, and others 2%.