The FIG markets were quiet and the deal pipeline thin this (Monday) morning on the back of sentiment weakened by emerging market concerns, but covered bond deals could still hit the market this week if the backdrop stabilises or improves, according to syndicate officials.

Argentinian president de Kirchner and Turkish prime minister Erdogan

Last week ended with a sell-off in emerging markets and global equities and a return to favour of safe havens due to increased concerns about the political and economic situation in countries such as Argentina, China, Thailand, Turkey and Ukraine.

This morning credit indices retraced some of the widening from Friday, but overall sentiment is weaker due to the concentration of negative headlines affecting various emerging markets, said a syndicate official.

“I would be surprised to see announcements hitting the screens today,” she said, citing an FOMC meeting on Wednesday and the start of the Chinese New Year on Friday as other factors that may keep investors on the sidelines.

Kommunalkredit Austria begins a roadshow in Vienna tomorrow (Tuesday) but this will not be wrapped up quickly, with the last meetings scheduled for London on 6 February, according to a syndicate official at one of the leads – HSBC, LBBW, Natixis, Raiffeisenbank International and UniCredit.

Commerzbank was on a roadshow last week in connection with its SME covered bond programme and is following up on this with some conference calls with investors, but the German bank is heading into blackout before release of its full year results on 13 February and will not be making any move to tap the market before then, said a syndicate official at one of the banks involved in the roadshow – Commerzbank, Crédit Agricole, Credit Suisse and Deutsche Bank.

Covered bond spreads have not been negatively affected by the emerging market volatility, said a syndicate official, and the covered bond market could be the one that allows for new issuance this week if sentiment improves overnight and tomorrow’s trading session is solid.

“Access is easier in covered bonds than in senior,” she said.

The last two euro benchmarks to have been priced were a Eu500m five year for Belfius Bank and a Eu1.5bn six year for BPCE SFH, and both are trading a little bit inside re-offer, according to a syndicate official.

Syndicate bankers said that some issuers are eyeing the market, but noted that a fall in interest rates has made longer dated issuance less attractive from the perspective of yield targets – in 15 years hitting a 2.5% coupon would be difficult for core issuers, said one.

Still, deals are possible if issuers are willing to pay a fair new issue premium, said bankers.