Covered bond issuance is expected to be light next week, with no new mandates announced as of this (Friday) morning and Bank of Montreal the main candidate, according to bankers, who said developments in Ukraine, where tensions have mounted, will need to be monitored.

No new issues hit the benchmark covered bond market this week, with syndicate bankers putting the lack of supply down to Easter holidays, blackout periods and issuers being ahead of funding targets for the year.

“There is no need for them to be chasing the market, instead they can sit back and assess the situation,” said one.

Syndicate bankers said that Bank of Montreal may choose next week to come to market. A deal from the issuer would be its first off a legislative programme approved by Canada Mortgage & Housing Corp on 11 April.

“The Bank of Montreal deal is taxiing to the runway as if it could be next week,” said one. “I’d use the recent Bank of Nova Scotia deal as fair guidance, as it will likely be the same tenor and category. Five year and seven year deals hit the sweet spot.”

Another syndicate official also said Bank of Nova Scotia covered bonds would serve as a reference point for pricing, as well as outstandings from Royal Bank of Canada.

Bank of Nova Scotia sold the tightest euro benchmark of the year from a Canadian issuer on 26 March, a Eu1bn five year priced at 9bp over mid-swaps. A syndicate banker today said the deal was trading at 8bp over and that this was flat to RBC’s 2018s.

Another syndicate official said that besides Canada, no particular jurisdiction looks especially set as a source of issuance, but that there could be supply out of Scandinavia given that SBAB and SEB report results today and are therefore no longer in blackout. Other Nordic issuers are reporting through next week.

The crisis in Ukraine does not appear to have hampered financial markets so far, but a syndicate banker said that issuance of covered bonds next week will depend on how the situation develops, highlighting that it appears to be gradually getting worse.

“Initial troubles in Crimea seemed to propel the market forward, with investors looking at how rates spiked and then taking advantage of it,” he said. “However, if the situation flares up next week, it could have a different impact.”

Thursday is a public holiday in many European countries and the latest US non-farm employment figures will be announced next Friday (2 May) so any supply next will probably be “front-loaded”, said syndicate bankers.

In the secondary market spreads were largely stable, with the exception yesterday of Depfa ACS Bank covered bonds, according to bankers, with its November 2016 asset covered securities (ACS) and May 2019s tightening by some 35bp and 25bp, respectively. The performance has been linked to an article in a German newspaper, Frankfurter Allgemeine Zeitung, according to which the German government may consider winding down Depfa Bank, the ACS issuer’s parent, rather than selling it.

According to a strategist, yesterday’s tightening reversed half of two months of underperformance versus Irish mortgage covered bonds, with Depfa ACS Bank covered bonds having widened by around almost 50bp since the middle of February.

A syndicate official said that Depfa ACS spreads had stabilised today.