A weak market reopening caused partly by a crash in the Chinese stock market contributed to a slower than expected start to the covered bond market today (Monday) with no deals forthcoming, but syndicate officials said conditions were still supportive while issuers are still eyeing deals before the summer holiday.

After two weeks of heavy euro covered bond supply, with a total of Eu12.75bn brought to the market this month, syndicate officials had last week suggested further benchmark issuance was likely to hit the market today.

However, as a sell-off in Chinese stock markets contributed to softer market sentiment this morning, no deals arrived and syndicate officials said covered bond issuers were likely to adopt a wait and see approach.

“After Chinese stocks spiralled, screens are certainly weaker than they have been in the last week or so,” said one syndicate official.

The syndicate official noted that the Shanghai composite index had fallen by around 7.5%, while equities were down by around 1% across Europe, with credit indices in senior 2bp wider and sub 3bp wider.

“Nonetheless, I think conditions still should have been supportive for a new deal,” he said. “To be honest, I’m surprised no one has come forward.”

Also citing a return of headlines relating to Greece as a possible cause of disruption, syndicate officials suggested the absence of new supply was because of the weaker tone of the market, rather than there being no issuers wanting to do deals this week. They said that issuers and syndicates are now closely monitoring the market and assessing whether there will further windows for issuance.

“It is not that deals can’t be done in this market,” said one, “it is just that after a reopening that was not so strong, and perhaps not good enough for an intraday execution, issuers are taking a wait and see approach.”

Another syndicate official noted that euro deals had gone ahead in the corporate space today, while the iTraxx Europe Cross-Over was only marginally wider, by around 5bp.

“So it’s not as if this is a total no-go environment, but it means that people who don’t have to do anything today will look to another day,” he said.

Syndicate officials agreed that those issuers looking for new windows should find opportunities this week. They noted that there are few economic data points with week – suggesting that a FOMC meeting on Wednesday is unlikely to have much of an impact on euro issuers’ plans – while many banks are releasing their Q2 figures this week.

“Overall this is perhaps the last week where transactions can be brought to the market before the so-called summer break,” said one. “With banks announcing their results, there will be opportunities and there will be traffic.”

Another syndicate official said issuers could still be encouraged by the receptions enjoyed by last week’s issues, citing high levels of oversubscription for each deal.

“Despite today’s weaker macro opening, I would say the executions of last week show that there remains market appetite for issuance until the last week of July,” he said.

“I think that while we will get some form of summer slowdown, this will still be a constructive market when things open up again later in August.”