Two Austrian issuers have issued RFPs for new covered bond issues as they closely eye the market, although market participants do not expect supply next week to pick up much from its relatively moderate pace despite favourable conditions.

Syndicate officials also cautioned that although the two Austrian banks have released requests for proposals, they will not necessarily announce mandates as soon as next week.

The bankers nevertheless said that conditions for Austrian issuers are positive, with the covered bond market having been unaffected by Austrian banks’ exposure to Swiss franc and Russia-related issues. He put a 10 year benchmark from Erste that was priced in January at 6bp over mid-swaps at 2bp, mid.

“If I was an Austrian issuer, I’d be looking very closely at the market,” he said. “They should have an easy exercise,” he said.

However, with NordLB Covered Finance Bank – which is holding a European roadshow that will run until 24 February – the only issuer publicly on its way to the market, supply is likely to remain at prevailing modest levels while issuers continue to focus on capital trades, he said – this week was the busiest yet of 2015 for Additional Tier 1 issuance.

“The market is good, it’s just a matter of attracting issuers to get on with their business,” he added.

Another banker agreed, saying he was surprised by the lack of activity.

“It’s a constructive market, conditions are stable and peripherals are rallying,” he said. “I don’t know why more issuers aren’t issuing.”

The relative lack of supply would only boost the already-favourable conditions, he added, with a lack of paper, high redemptions and the ECB’s covered bond purchase programme working in issuers’ favour.

The successful sale by National Australia Bank of a Eu1bn 12 year covered bond yesterday (Thursday) was a good example of this, he added, with the deal having attracted a book of almost Eu2bn despite being outside the remit of CBPP3.

“That was a great trade,” he said. “It was certainly the highlight of the week.”

However, another syndicate official said he expected a busier week, with mandates possibly to come from a mix of jurisdictions and with a range of tenors.

He agreed that issuers would be well advised to proceed, noting that the market was consistently breaking records, with a NordLB Eu500m four year Pfandbrief having been sold with a record low coupon of 0.025% yesterday.

Along with a Eu1bn five year CFF issue, the deals for NAB and NordLB took supply this week to three deals totalling Eu2.5bn, very much in line with the volumes of the previous two weeks.

Activity could meanwhile be subdued early next week as some German regions celebrate the traditional Carnival (or Karneval in German) holiday, another syndicate official added.

“It should have an impact as at least one-third of the market will be off,” he said, “but it is not something that stops the world turning.”

Photo: Cologne Carnival 2013; Source: MatthiasKabel/Wikimedia Commons