Bankers are cautiously optimistic that euro benchmarks will be done next week after an improvement in sentiment and spreads this week, with issuers such as Banca Carige and Eika Boligkreditt finishing roadshows and others said to be eyeing the market.

A Eu500m November 2021 issue from Münchener Hypothekenbank was the only euro benchmark covered bond this week, but market sentiment is said to have improved and secondary spreads settled after the break in supply. Syndicate officials today (Friday) said core spreads have tightened 2bp-3bp over the week, and peripherals up to 10bp depending on the name and jurisdiction.

“It is fair to say that sentiment is better now the market has benefitted from a breather,” said one. “The question everyone must ask is whether this is a dead cat bounce, but certainly there is not as much pressure as there has been and the secondary market is looking better.”

Another said he does not expect many issuers to tap the market next week but is hopeful supply will increase, and said deals could go well if conditions remain as they are.

“After the recent widening, valuations look attractive, whether it is from an absolute spread perspective or looking at value versus govvies,” he said. “From an investor’s standpoint, this is an interesting entry point if you want to add risk.

“All in all, next week could be a good window for those willing to use it.”

However, one syndicate official said that it remained to be seen who would test the market.

“Syndicate people are just scared of trying to bring a new issue and kick things off again,” he said. “Everybody’s like, yes, things are better, but where will I find that Eu500m or Eu750m of demand, especially for a non-CBPP3 eligible bond?”

Bankers noted that the publicly announced pipeline is well stocked, and added that other issuers – from Sweden, for example – are also monitoring the market with a view to joining the market next week. They noted that most Nordic issuers are now in blackout periods, but said some are still in a position to issue covered bonds, noting that Norway’s Eika Boligkreditt is also in the pipeline.

Eika will on Tuesday finish an investor roadshow ahead of a potential euro benchmark deal via leads Deutsche, Natixis, Nordea and UniCredit.

“We have had a roadshow with a potential euro transaction in the second half of the year in the schedule for quite some time,” said Kristian Fiskerstrand, vice president, funding at Eika Boligkreditt. “Despite the increase in market volatility we believe this strategy is still valid.”

He said that the roadshow would allow the issuer to collect feedback from investors ahead of the deal, as well as the opportunity to provide an update on its high quality cover pool and Norway’s strong financials.

Fiskerstrand said that Eika will continue to be a regular issue in euros. Its most recent euro benchmark issue came in March 2014, when it sold a Eu500m (Nkr4.61bn) seven year issue. Fiskerstrand noted that the deal corresponded to roughly 40% of Eika’s total issuance in 2014, with the rest sold on the Norwegian market. He added that so far in 2015 Eika has issued Norwegian krone funding equivalent to around Eu750m in total.

Recent issues from Norway’s SR-Boligkredit and Sweden’s SCBC and Swedbank were all seen trading at around their re-offer levels, after having being seen 2bp-3bp wider at the start of the week.

Banca Carige could launch a euro benchmark issue after completing a roadshow today (Friday), although is considered likely to wait for a stronger issuer to reopen the market, either from a core or non-core jurisdiction, given that its covered bonds are rated Ba1/BBB-.

“The issuer clearly wants a trade that works and is not under pressure to rush,” said a syndicate official “And there will be a lot of price discovery on this one.

“That said, it will have the ECB support and could get a good domestic bid.”

Commerzbank, Mediobanca, Natixis, Nomura and UBS have the mandate.

Also in the pipeline are Raiffeisenlandesbank Niederösterreich-Wien, which will finish investor meetings today, and Hypo Tirol and Raiffeisenbank a.s., which completed roadshows last week. Sparkasse Pforzheim Calw will meanwhile hold investor calls on Monday and Tuesday ahead of a potential Eu250m mortgage Pfandbrief, which will be the German savings bank’s largest to date.