A debut for Banca Popolare di Sondrio on Tuesday meant that at least one benchmark covered bond was priced each week in July, taking total supply this month to Eu6.5bn, but syndicate bankers now expect the summer break to get into full swing, and to last until mid- to late August.

In total, nine deals were priced in July, with at least one transaction a week. While this amounts to one more deal than in the same period last year, the deals this July were overall smaller, and totalled Eu6.5bn compared with Eu8.5bn in 2013.

July’s supply closed with the unexpected inaugural euro benchmark from Banca Popolare di Sondrio. The Italian bank priced a Eu500m five year obbligazioni bancarie garantite at 75bp over mid-swaps on Tuesday. Syndicate officials today said the deal was around 1bp tighter.

Syndicate bankers said that the primary market will be quiet for a few weeks, as the summer break gets into full swing. They said that they would expect covered bond issuance to resume towards the end of August.

“The covered bond market is stable, still performing, and spreads continue to tighten,” said one syndicate official. “But I see no new bonds on the horizon, and doubt we will see any until after the UK bank holiday [25 August].”

Another syndicate official said that while he does not expect any new issuance until the latter half of August, issuers would not have any difficulties accessing the market should they choose to do so.

One syndicate banker said he expects the market to be quiet for at least a couple of weeks, even though the market would be open for business, but for supply to resume early after the anticipated break, in mid- to late August.

“I think that’s because people will recognise that the market is open and in pretty good shape,” he said.

Portugul’s Banco Espirito Santo (BES), which has been under intense pressure in recent weeks due to concerns about the implications of financial troubles at its shareholders, on Wednesday announced a Eu3.5bn loss.

Market participants gave a mixed picture of the reaction in BES covered bond spreads, with some seeing secondary levels as having widened by up to 40bp but others noting more limited to no moves. Bid offer spreads are “enormous”, said one, adding that BES’s subordinated debt is taking the brunt of concerns. BES Lower Tier 2 2023s are only trading on a cash price, and down from 86 to around 50 since Wednesday, according to the banker.

“The sub moves are most relevant and telling of the state of affairs,” he said.

He and other syndicate officials noted that other Portuguese covered bond spreads were largely unaffected by the latest development at BES.

“In the early stages there was some contagion but now people are seeing it as an isolated event,” said the above mentioned syndicate banker.

Another said that the containment was indicative of a healthy market, and showed that the problems at BES pose limited systemic risk.