Measures announced by the ECB yesterday (Thursday) could have a modest impact on covered bond supply but are supportive of spreads, according to analysts, with syndicate bankers saying a couple of deals are possible in the immediate aftermath of the central bank’s meeting.

The European Central Bank’s announcements – which included a reduction in headline policy interest rates, the development of an asset purchase plan, and targeted longer-term refinancing operations (TLTROs) – were said by syndicate bankers to have had the biggest impact on spreads in peripheral jurisdictions.

While the market at large had rallied following the announcements, the impact on covered bonds had been minimal, they said, with no noticeable impact on core jurisdictions and a 3bp-5bp tightening in peripheral spreads.

“There will be an impact in terms of bank funding, but this will more likely affect senior supply,” said a syndicate banker. “I don’t expect to see a decline in covered bond issuance following these announcements or following the introduction of TLTROs.”

However, Joost Beaumont, fixed income strategist at ABN Amro, said that the introduction of TLTROs will probably weigh on covered bond supply, resulting in an increase in negative net supply.

“The TLTRO will provide cheap funding for banks, limiting their funding needs,” he said. “Furthermore, the ABS purchase programme can have some impact on new supply of covered bonds.”

Bernd Volk, head of covered bond research at Deutsche Bank, said that the introduction of TLTROs will likely result in lower overall bank bond supply and as a result “the hunt for pick-up will probably stay”.

“Even in the event that covered bond supply would not be impacted,” he added, “the likely lower overall bank bond supply seems supportive for covered bond spreads.”

UniCredit analysts at the end of last year forecast that new LTROs arriving in 2014 would depress supply by some Eu20bn to around Eu100bn. Florian Hillenbrand, senior credit analyst at UniCredit, said this morning that the announcement of the TLTROs would have limited impact on the prevailing supply outlook given that issuance had already been subdued this year.

The ECB’s announcements follow an opening week to June in which issuance surpassed that of the whole of May, with six euro benchmarks on Tuesday and Wednesday totalling Eu4.75bn as well as a US$1.25bn (Eu921m) deal from Commonwealth Bank of Australia, only the second US dollar covered bond benchmark of the year.

Expectations for next week from syndicate bankers are for a couple of euro benchmarks, although there are no publicly announced names in the pipeline.

Talk of a euro benchmark from Caisse centrale Desjardins du Québec was downplayed by a syndicate official at one of the banks that worked with the Canadian issuer on a roadshow that was completed this week, Barclays, Crédit Agricole and DZ Bank.

“The CCDQ roadshow was non-deal related, and I am not aware of any plans for it to return to market next week,” he said. “This week saw an abundance of issuance, and all the deals performed well, so I would expect to see a couple of deals next week.”