With the market in holiday mode, new covered bond issuance is not expected to arrive until next week at the earliest, while bankers suggested a Korean legislative debut from Kookmin will not materialise this week, as had been anticipated by some, in the wake of DBS’s debut.

This week’s inactivity follows the second heaviest July in the euro covered bond market, after euro benchmark supply totalled Eu17.75bn last month. Meanwhile, benchmark supply in US dollars and sterling reached $3.5bn (Eu3.2bn) and £800m (Eu1.1bn), respectively.

As of the end of the month, analysts calculated, year-to-date euro benchmark supply had reached around Eu78bn – around Eu4bn more than issuance over the first seven months of 2014.

However, despite citing market conditions as remaining generally supportive, syndicate officials said new benchmarks are unlikely to be brought to market this week and predicted the lull could last until at least mid-August.

“It is an interesting market backdrop,” said a syndicate official. “Usually at this time of year things are very quiet, but while we don’t have deals out there, investors are still around and things are rather busy behind the scenes.”

While noting that no euro-denominated deals had been launched in other markets today (Wednesday), syndicate officials said new issues could not be ruled out.

“It is not the best timing, with the market in holiday mode” said one, “but if a deal is easy to understand and reasonably priced then there’s no reason it cannot be done.”

Another syndicate official agreed.

“Maybe the market does have a surprise up its sleeve, but it would be just that – a surprise,” he said.

Bankers noted that one deal the market had been anticipating is a 144A/Reg S dollar issue from Kookmin Bank, which would be the first covered bond launched under a South Korean legislative framework completed last year. With leads BNP Paribas, Citi and Société Générale, the issuer completed a roadshow promoting its programme on 25 June.

Market participants away from leads said the issuer had this week been in discussions with investors, with some suggesting the deal could arrive as early as this week, with a rumoured five year maturity.

However, stating that the window for issuance this week had narrowed to tomorrow (Thursday), syndicate officials away from the leads said they were sceptical the deal would arrive imminently.

“Despite the noises to the contrary I was never convinced Kookmin was one for this week,” said one. “I think they are more likely to move the week after next, when more people are back at their desks.”

Another syndicate official agreed, and said he thought Kookmin unlikely to find the traction it would want during the summer holiday period.

“Korean issuers often want the best of all worlds with their trades – the tightest spread, the biggest size,” he said. “In this market, with investors buying so selectively, that is not realistic.”

Kookmin’s anticipated issue will follow the inaugural Singaporean covered bond, a $1bn three year issue from DBS Bank that attracted Eu1.37bn of demand – 49% of which was from investors outside of Asia – and was priced at 37bp over mid-swaps last Thursday.

The syndicate official pointed to the spread offered by DBS as a sign that the timing would not be ideal for Kookmin.

“In terms of distribution it was a very good trade, but I think the pricing level is not the tightest they could have achieved,” he said. “It is difficult to say how much of a premium a debut offers, but a spread of 37bp for a three year is fairly standard, and I think they could have benefited a bit more from the rarity and diversification they were offering.”

However, another syndicate official said DBS’s offering had been priced tighter than he expected.

“It was a very good result, and it is now trading 1bp tighter, which is a good sign,” he said. “For Kookmin it is a good deal to follow.”

He added that if Kookmin were to print a five year issue it would be a sensible move.

“The curve is pretty flat between three and five years,” he said. “Sure you can get a three year done very tight, but you don’t get the full benefit of the underlying collateral.

“You may as well print a five year while you can and build a proper curve out.”