Senior unsecured and Tier 2 transactions for Italy’s UBI Banca and UniCredit kicked off FIG activity for this week, but syndicate bankers today (Monday) suggested benchmark covered bonds will follow, with Bank Austria mentioned as a likely issuer.

The public pipeline in covered bonds is empty except for a roadshow for NordLB, which is meeting with investors ahead of what is expected to be a US-targeted new issue, but the market is strong and open for deals this week, according to syndicate bankers.

Political wrangling in the US over an increase to the federal government’s debt ceiling finally led an agreement last week to fulfil market participants’ optimism that a deal would be reached to avoid a US government default. Equities are said to have been the main beneficiary, with credit markets having largely resisted being dragged down by the protracted negotiations. However, peripheral credit markets have also rallied, with Banca Carige on Thursday for example becoming the latest Italian bank to take advantage of the appetite for higher yielding paper.

“The higher the beta, the stronger the demand,” said a syndicate official.

Syndicate bankers said that the market stands ready to absorb new supply, with large redemptions of government bonds a supportive factor. US non-farm payrolls are scheduled for release tomorrow (Tuesday), but, barring any large surprises, should not be disruptive, according to syndicate officials.

One said that lower beta issuers could have a harder time attracting excess interest from investors given tight spreads, but suggested that Austrian and German issuers, for example, have the benefit of being able to be more pinpointed in the marketing of their deals and avoid large spread tightening from initial price thoughts to final re-offer spreads.

UniCredit Bank Austria has been named as a new issue candidate in benchmark covered bonds this week, with a well-received Lower Tier 2 transaction from its parent today seen paving the way for the Austrian subsidiary to make a move.

The issuer’s last new issue in covered bonds was a Eu500m five year sold at 26bp over mid-swaps on 23 July, which it increased by Eu200m in early September.

Swedish supply has also been identified as a possibility given that some issuers will come out of blackout this week and the euro market is said to offer all-in funding costs that are lower than those in the Swedish krona market.

“Swedish funding costs are at historically attractive levels in euros for longer dated issuance,” said a syndicate official, suggesting that there could be a few Swedish deals before the end of the month.