Covered bond issuance has dwindled to a trickle this week, with a pbb tap yesterday (Monday) the only supply so far as bankers cite a bond market conference and thinking about the first ECB TLTRO as factors draining the primary market of momentum.

Last week was the second busiest week of the year for benchmark covered bond issuance, with six issuers selling Eu5bn of bonds in aggregate, but the primary market lost this momentum this week. KBC Bank and French issuers had been mentioned as new issue candidates for this week, but new benchmark supply has failed to materialise from any jurisdiction. A syndicate official said he does not expect KBC to come to market this week, but that it is “a name we are monitoring”.

Goldman Sachs, meanwhile, will tomorrow (Wednesday) embark on a roadshow of a new structured secured product that although not a covered bond draws on features of the asset class and is targeted at rates investors. (See previous coverage.)

Market conditions are ripe for the taking for benchmark covered bond issuance, however, according to syndicate bankers, with one saying it is a shame there is not more primary market activity.

An explanation for the lack of new deals, according to syndicate officials, is that issuers are assessing whether and/or how to participate in the targeted longer term refinancing operations (TLTROs) that the ECB has announced it will be offering. The first TLTRO is scheduled for September, and a second for December.

“It’s a pretty decent market but it’s challenging to pull issuers off the fence,” said a syndicate official. “They’re assessing what to do about the LTRO. It’s not a demand-driven difficulty.”

Another said that the cost of borrowing money from the ECB under the TLTRO makes it a “sexy” option for banks, adding that the pending end of the first half of the financial year may also be keeping issuers from launching new transactions. A debt capital markets conference in London today and a weak opening in the equity markets could also explain the subdued primary market, according to another syndicate banker.

Deutsche Pfandbriefbank (pbb) priced a Eu150m tap of a 0.875% January 2017 mortgage Pfandbrief yesterday, taking the total issue to Eu750m. Barclays, BNP Paribas, Commerzbank and NordLB priced the increase at 5bp through mid-swaps, in line with guidance of the 5bp through area. The deal was first launched at 8bp over in January last year, and was topped up by Eu100m in the interim.

Yesterday’s tap had been planned for some time and was essentially a retention trade, although the leads built order books for the deal, according to a lead syndicate official. He said the tap was “tailor-made” for the issuer and that Eu150m was the target size from the outset.