Banco Popular Español launched the first benchmark covered bond supply from Spain since the end of May and had the market to itself this (Monday) morning despite constructive market conditions, with syndicate officials saying the path is clear for further supply.

The new issue, a four year cédulas hipotecarias, is BPE’s second benchmark covered bond this year. It sold a Eu400m tap on 13 May while its other new issue was a Eu500m six year priced in the middle of January.

The last Spanish benchmark covered bond before today’s transaction was some three months ago, a Eu500m five year for Caja Rural de Navarra, its public debut in the asset class.

BPE’s deal was launched into a supportive market that has encouraged a host of issuers across market segments to tap investors for funds, with the senior unsecured market the busiest in terms of FIG flow supply. Deutsche Bahn Finance, Deutsche Pfandbriefbank, and KBC are out with senior unsecured deals, for example.

“The underlying market is very constructive,” said a syndicate banker. “The path for this week is very clear.”

Another said that US President Obama’s decision to hold off on military action in Syria had been well-received by the market and that sentiment was positive.

Although BPE was the only covered bond issuer in the market today, the pipeline is fairly well stocked and syndicate officials said that the more supply could be launched over the coming days. This could be frontloaded, however, given European Central Bank and Bank of England monetary policy meetings on Thursday, a G20 meeting taking place from Thursday to Friday, and US non-farm payrolls to be released on Friday.

Norway’s Sparebanken Vest Boligkreditt is a candidate for new issuance this week. It has been on a roadshow and is due to hold its last investor meetings on Tuesday. La Banque Postale has also been holding investor meetings and is seen as an issuance candidate. Kommunalkredit Austria starts a roadshow on Wednesday, and its peer Raiffeisenlandesbank Niederösterreich-Wien has booked a roadshow slot for the middle of September.

Away from the public pipeline, syndicate officials have mentioned rumours about a UK issuer potentially being interested in tapping the euro market. Such a move would be interesting given that that it has been 16 months since the last UK euro deal, with a government Funding for Lending Scheme (FLS) offering UK issuers cheaper funding than is available on the market.

On BPE’s deal, leads Bank of America Merrill Lynch, BPE, BBVA, Credit Suisse and Natixis went out with initial price thoughts and then guidance of the 240bp over mid-swaps area.

The leads will size the four year mortgage backed deal at Eu750m; the issuer had been targeting a minimum Eu500m deal, according to a lead syndicate banker. More than Eu800m of orders had been placed around 20 minutes before the order books were due to be closed, at 1400 CET.

“It’s going well,” said the lead syndicate official.

At 240bp over, the deal was offering a premium of some 50bp over Spanish government bonds, he said, noting that this looks generous compared with some other peripheral issuance that trades through the sovereign. He pointed out that BPE’s covered bonds are not rated triple-A. Moody’s rates the cédulas hipotecarias Baa2, and Standard & Poor’s rates them BBB+.

The lead syndicate banker put the new issue premium at 5bp over, and said that this was in line with the rest of the covered bond market. Syndicate officials away from the leads variously put the new issue concession at 5bp-7bp and 10bp, but also saw this as in line or reasonable.

“BPE isn’t a national champion, and others have started with a similar new issue premium,” said one. “There are a lot of deals out in the market today so it’s a good, sensible approach. At 240bp over, the deal should go well.”

The lead syndicate official said that BPE 2017s were trading in the low 230s over, and a 2018 issue in the low 240s.