Covered bond supply will remain limited this week in spite of more favourable market conditions, bankers said today (Monday), on the back of low investor appetite and the need for elevated premiums, with Hypo Tirol, for example, expected to sit the week out despite having roadshowed.

Only two euro benchmark covered bonds were brought to the market last week – for SCBC and Bankinter – with bankers citing tough conditions as a widening of spreads continued, and new issues found only limited demand in spite of sizeable new issue premiums.

Syndicate officials said conditions were this morning more supportive for new issuance, with the broader market looking stronger and covered bond spreads mostly stable.

“The market is better,” said one. “This repricing has calmed for the moment, and we are now not only seeing offers on the secondary but also some bids.

“They are mainly coming from the Eurosystem, but that is enough at the moment to stop spreads widening and even to see some tightening.”

However, syndicate officials said that investor appetite remains low, meaning supply is expected to be limited this week even though issuers from a range of jurisdictions are considering new deals.

“It is an OK-ish market, or at least it is not the worst market we have seen recently,” said one. “But there is nothing today to convince an issuer to jump right in.”

Bankers said that issuers would be particularly wary after the outcome of last week’s issues showed that investors remain reluctant to invest in new deals, with a SCBC Eu750m five year gathering Eu900m of demand and Bankinter building books of Eu800m for a Eu750m five year that was priced in the middle of IPTs.

Among the banks eyeing the market is Hypo Tirol, which completed a European investor roadshow on Monday of last week ahead of an expected benchmark issue. However, a syndicate official at one of leads Barclays, Deutsche, Erste, LBBW and Société Générale said he did not expect the deal to arrive this week because the likely clearing level would be too high.

“The issuer’s price expectations don’t match what they would likely get from the market this week,” he said. “They will be getting back to investors but for now it is a case of sitting and waiting.”

Raiffeisenbank a.s. is also in the pipeline after holding investor calls on Tuesday of last week ahead of a potential euro covered bond issue, while Banca Carige, Raiffeisenlandesbank Niederösterreich-Wien and Eika Boligkreditt hold European roadshows this week.