A three week interruption to new euro benchmark issuance is set to end next week, with Sparkasse KölnBonn due and after the reopening of the euro financial institutions market by Swedbank yesterday (Thursday) with a Eu750m seven year senior unsecured benchmark.

This week has been the third in a row without any new euro benchmark covered bonds, with issuers apparently having been deterred by a sustained period of market volatility, and the senior unsecured market had also been without a benchmark issue for two weeks.

But Swedbank attracted Eu1.9bn of demand to its Eu750m deal, priced it at the tight end of guidance, and saw its deal perform in the aftermarket, while Rabobank also sold a Eu1.5bn five year senior unsecured FRN yesterday.

“Swedbank’s deal is clearly the reopener of the euro market,” said a syndicate official at one of the leads. “It is the one the market was waiting for.”

Kimberly Bauner, a member of the long term funding team at Swedbank, said it issued yesterday because it was keen to come to market before a public holiday on Monday closes some jurisdictions, including Germany and the UK, and ahead of further Swedish holidays in June, and she added that the issuer was encouraged after seeing comparable deals perform well over the last week.

“We had seen a return of stability over the prior couple of trading sessions,” she said. “But we were very much aware that it is a volatile market these days, so choosing the right day to execute is key right now. We knew it was a fairly clear day economic data-wise, and the news regarding ECB front-loading of purchases was a further positive for issuance.”

A syndicate official at one of Swedbank’s leads estimated the deal offered a relatively limited new issue premium of 4bp, stating that such a level demonstrate that core issuers will not need to significantly pay up in current conditions.

“There is a lot of cash out there that needs to be put to work, so you can put together a well oversubscribed deal with a minimum premium,” he said.

Bankers said they expected covered bond issuers to be encouraged by Swedbank’s outcome, as it shows demand is there for euro deals.

“If this stable backdrop continues then more issuers will look at following Swedbank back into the market,” said a syndicate official away from the deal.

Sparkasse KölnBonn is the only issuer publicly in the pipeline after having finished a roadshow yesterday. Its new issue is expected to be launched after Monday’s public holiday next week, most likely on Tuesday or Wednesday, according to a syndicate official at one of leads Barclays, Deka, Helaba, Natixis and UniCredit. He said the issuer’s April 2020s were trading at minus 20bp, mid, and October 2024s at minus 19bp.

And with conditions improving, bankers predicted that more core names will next week join the German issuer in the pipeline.

“It looks as though the market is stabilising,” said an official at a potential issuer. “We are confident that after the long weekend there will be a good window for issuance next week.”

He cited the executions of a Eu250m eight year Pfandbrief from Kreissparkasse Köln and a benchmark-sized Eu500m tap of a four year NordLB issue, both on Wednesday, as promising signs that conditions are improving.

A syndicate official agreed, stating that it appeared as though the recent volatility had abated.

“I think we will see continued primary activity if things stay as they are,” he said. “The market has taken a more positive trajectory.”

However, another banker said that although the news of the ECB’s front-loading boosted sentiment this week, its long term approach has not changed and hence the impact will likely be shorter-lived.

“The risk now is maybe that we experience another similar correction to the one we have just seen,” he said. “This supports the idea that you should be looking to do issues sooner rather than later, especially on the back of these deals.”