At least one new benchmark covered bond is close to being ready for launch, although it could be held off on until next week, according to syndicate officials speaking this (Tuesday) morning, while BNS is ready to sell SEC-registered covered bonds into the US.

Several syndicate officials had expected the first new covered bond issues since the summer lull to emerge this week, and although the euro bond market overall got off to a quiet start after a public holiday in the UK yesterday (Monday), new benchmark covered bond supply could still emerge this week, according to syndicate officials.

One said that he was working on a deal, which will most likely be for this week, but could also yet be next week’s business. Another also gave the impression that a pipeline of sorts was developing, saying that several core issuers are candidates for doing a deal in the near future and that although a new issue would probably be for next week he would not rule out a transaction hitting the market this week.

“Some issuers are ready to go, but it’s very wait-and-see at the moment,” he added.

Some bankers had last week spoken of a long dated deal for a core issuer being under consideration.

Regardless of the specific timing of the first benchmark post-summer, there was consensus among syndicate officials that there was unlikely to be a rush of near term supply and that issuers are considering their options, including use of the targeted long term refinancing operations (TLTROs) to be carried out by the European Central Bank.

“A lot is being decided this week in terms of mandates, but issuers may prioritise other projects besides covered,” said one, adding that the situation with respect to senior unsecured supply prospects is similar and that hybrid capital deals are more likely to be at the top of issuers’ agendas.

Another syndicate banker said he is not expecting any new issuance in covered bonds this week, but that he similarly also had not expected the two taps that were priced last week – a Eu175m retention trade for Deutsche Pfandbriefbank (pbb), and a publicly marketed Eu500m increase of a May 2017 Pfandbrief for Landesbank Hessen-Thüringen (Helaba).

“Deals would presumably be possible,” he said. “Demand is there and interest rates are only going lower, but I think the first proper new issuance will wait until next week.”

As part of their deliberations with issuers, syndicate officials are having to gauge the extent to which investors will balk at participating in new, in particular long dated deals, given that yields fell to new lows after a rally over recent weeks. Comments from ECB president Mario Draghi at a Federal Reserve Bank of Kansas City symposium in Jackson Hole on Friday, which were taken as signalling the ECB may proceed with quantitative easing, triggered a further rally in yields, with 10 year swaps down from 1.18% on Friday to 1.13% today, 10 year Portuguese government bonds inside 3% after tightening some 25bp since yesterday, and 10 year Spain close to reaching 2%.

“How much longer until we get the first 10 year jumbo with a coupon in the zero percent?” asked a syndicate official, suggesting that “all that is needed” is a 20bp rally in 10 year swap rates for a core issuer like BayernLB to come with a coupon of less than 1%.

Syndicate officials’ views on the likely investor response to long dated deals offering low yields differed, with one suggesting that there was a feeling among some accounts that a limit had been reached, but another saying investors should buy such bonds given that rates are probably only going to fall further.

Meanwhile, Canada’s Bank of Nova Scotia filed a covered bond prospectus with the US Securities & Exchange Commission (SEC) on Wednesday under a registration statement it filed at the end of May 2013. The filing of the prospectus means that BNS is in a position to publicly offer covered bonds in the US.

The only other foreign issuer to have sold fully SEC-registered covered bonds into the US is Royal Bank of Canada, with all other Yankee issuance done in the private placement 144A format, which restricts the buyer base for the product and is also not eligible for major bond indices.

BNS did not respond to questions by the time of publication. The bank reports its third quarter results today.