Issuers are said to have held off green-lighting new euro benchmark covered bonds this (Monday) morning despite a positive outcome to Greek negotiations, and syndicate officials differed as to the likelihood of supply emerging through the course of this week.

At least one issuer is said to have come close to this morning launching the first true benchmark euro covered bond in four weeks – since a Eu500m seven year HSH Nordbank issue on 15 June, with a Eu500m three year for Caffil last Thursday widely considered to have been more of a club-style deal than a benchmark. However, in spite of a better tone in the market after news of an agreement between Greece and its creditors emerged at around 7.30am London time, no new issue emerged.

“We did not have enough comfort to pull the trigger and be sure that we could achieve the target size and price,” said a banker involved in the issue, “and there was no point in rushing in and taking an unreasonable risk. If you look at screens, the secondary market, etc, it just doesn’t feel strong enough.

“Maybe we were wrong, but it was not worth risking.”

He said that equity and credit indices had improved after news of the Greek agreement emerged, but that although prices were being marked higher by traders it was not the result of strong flows.

“Everyone is still in a wait and see mode,” he added. “Issuers are changing their mind every second.”

Another syndicate official said that issuers were reluctant to be first to test the market.

“No-one wants to be the first one – and I can understand their concerns,” he said. “It is also a question of new issue premiums. Let’s say it is 5bp, 6bp or 7bp in core: will the one that reopens the market pay the most, or will it be the other way around?

“We haven’t seen a successful deal in public format for four weeks and secondary is not the most liquid, so a decent new issue premium will need to be paid to compensate for that and the volatility. But will the next start with IPTs at the landing level of the first, or is it that the market will not yet be ready to digest more than one issue so the second will have to pay more?”

One banker said that, with today’s window having been missed, a French public holiday tomorrow (Tuesday), a deadline for Greek implementation of initial agreement measures on Wednesday and an ECB meeting on Thursday, the week could pass without any euro benchmark issuance.

“I fear that today was the best window,” he said, “so the week is dead.”

But another was more optimistic, not seeing the French or ECB dates as preventing supply.

“All in all we are moving back to business as usual,” he said. “We may not necessarily see the pipeline kick off tomorrow and a return to normality, but issuers are looking at the market concretely again rather than worrying about the crisis.

“In my opinion, we will see at least one deal this week. Everyone expects a German to reopen the market and one or two French could be thinking about doing something – although the Scandis are out and it is maybe a bit too early for the periphery.”

Photo: Jeroen Dijsselbloem, Jean-Claude Juncker, Donald Tusk – the latter, coiner of “agreekment” this morning; Source: EU