ANZ Banking Group launched the first Australian euro benchmark covered bond since late May today (Tuesday), a Eu1bn five year, with other new issues expected to follow this week as the primary market continues to absorb deals despite softer sentiment.

ANZ had the covered bond market to itself today, although a couple of deals were launched in the SSA market and Wells Fargo is out with a seven year euro senior unsecured transaction. Norway’s Sparebanken Vest Boligkreditt starts a roadshow today, which will extend into early next week, according to a banker at one of the mandated banks – Danske Bank, HSBC, LBBW, and Natixis. (Sparebanken Vest leads corrected.)

The ANZ transaction is the first benchmark covered bond of the week, with yesterday (Monday) having been a public holiday in the UK. A syndicate official said that issuers used yesterday’s trading session to discussion their approach for deals this week in senior unsecured and covered bonds, and that this should be another busy week.

The wider market is said to be slightly unsettled, however, due in part to increasing concern about the situation in Syria. Some poor macro-economic data was released yesterday in the form of US Durable Goods data, although German business sentiment results came in better than expected today. Some uncertainty about the political situation in Italy is also said to be affecting sentiment.

“The market isn’t too good,” said a covered bond syndicate banker. “Equities were down 1.5% and concerns about Syria are driving the market.”

However, another said that although the market “looks soft if you look at the screens”, with the iTraxx Senior index for example some 5bp wider, the secondary market is quiet and in the primary market deals are getting done.

“There hasn’t been the same reaction in cash,” he said. “There’s no panic.”

Syndicate officials said they expect further benchmark covered bond supply this week, with one saying that the market is open for core issuance and that peripheral deals could also be on the agenda if the market settles.

Another syndicate said he heard that a further Antipodean issue is in the pipeline.

ANZ, Barclays, BNP Paribas and UBS are lead-managing ANZ’s deal. They went out with initial price thoughts of the mid to high teens this morning before setting guidance at the 17bp over mid-swaps area.

They will price a Eu1bn deal at 17bp over after having collected nearly Eu1.2bn of orders.

The deal is ANZ’s second euro covered bond benchmark of the year, after a Eu1bn seven year on 2 May. That was re-offered at 17bp over mid-swaps, and was trading at around 18bp over, according to a lead syndicate official. Other comparables that informed the leads’ approach to pricing include 2017 issues for Commonwealth Bank of Australia and National Australia Bank, which are around 2bp over, and Westpac Banking Corporation 2019s and 2020s at 14bp over and 17bp over, respectively.

The Australian curve points to fair value of around 15bp over for a new ANZ 2018 benchmark covered bond, said the lead syndicate official, with the 17bp over area therefore including a small new issue premium in line with that incorporated in recent deals.

More than Eu1bn of orders were in the book before noon UK time today, with the leads due to close the books not long thereafter.