Goldman Sachs is understood to be targeting a seven or 10 year maturity for its impending FIGSCO transaction, which is expected to be next week’s business, according to syndicate officials, who added that covered bond issuance is otherwise expected to be limited.

The US investment bank has set up a Eu10bn programme for the issuance of “fixed income global structured covered obligations” (FIGSCO) by FIGSCO Issuer Ltd. It carried out a week long investor roadshow, lead managed by Barclays, Crédit Agricole, Goldman Sachs, Natixis and UBS.

An issue in the seven or 10 year maturities is understood to be under consideration. A provisional rating from S&P was assigned on the basis of a Eu1bn July 2021 deal, and a seven year maturity is considered most likely.

A banker suggested that pricing at a spread roughly 45%-50% of the level of Goldman’s senior unsecured debt had been under discussion, with a seven year senior unsecured level of 85bp-90bp over being used as a reference. This would translate into a spread in the low 40s over mid-swaps, although the mid to high 40s is considered a more likely starting point.

Given the amount of credit work and approvals investors are faced with by the new and complicated structure, launch is not expected until the middle of next week.

“It’s not a question of whether or not the deal works,” said the banker. “It works. We would just rather wait 24 hours more to make sure that everyone who could be involved is ready to buy.”

A syndicate banker away from the leads said that a deal of seven or 10 years would capitalise on the “sweet spot” for issuance, adding that he would advise any issuer to opt for a seven or 10 year maturity. He said that just what the pricing turns out to be would be interesting given the prevailing level of demand.

“While it is an unknown quantity in the sense of its unique asset pool, it has the overcollateralisation and the strong rating,” he said. “Investors will want something for this, but they are also hungry, and this hunger may allow the pricing to be driven tighter.”

The covered bond market is expected to be quiet next week, with no new mandates having been announced. Syndicate bankers said that they had seen a drop-off in issuer interest, with one noting that three-quarters of his potential candidates for issuance had decided to wait until after the summer recess.

“The most viable candidates are now non-Europeans,” he said. “Australians, Canadians and Kiwi issuers are currently eyeing the market, and I would expect to see a couple of Canadian banks issue at the end of the month.”

Another syndicate official said Toronto-Dominion Bank is considering issuing a euro benchmark covered bond. This follows the registration of its legislative covered bond programme with the Canada Mortgage & Housing Corporation (CMHC) on 25 June. The Canadian bank became the seventh issuer to have its programme registered with CMHC, which registers Canada’s legislative covered bond framework.