Covered bond issuers are eyeing the market and will likely announce new deals in the coming days, according to bankers, in spite of weak sentiment in a directionless wider euro market, but volumes are expected to be more modest after heavy supply in the past two weeks.

Some 18 euro benchmark covered bonds have been sold so far this month, comprising Eu17.25bn of supply, compared with Eu18.75bn in the whole of January last year. No new benchmarks hit the market last Thursday or Friday, however, after four deals met modest demand on Wednesday, and syndicate officials suggested the market needed a break.

“Over Eu17bn of supply in one and a half weeks was probably too much,” said a syndicate official. “Wednesday’s deals were digested, but demand did not look too great, and with pressure on the secondary market and peripheral spreads in particular, issuers are now cautious.”

Another syndicate official noted that year-to-date supply was on average 135% oversubscribed, compared with 173% for issuance last January.

The break in issuance was also attributed to weak market sentiment, and syndicate officials said broader market conditions still looked challenging today, citing a fall in European equities this morning, in spite of a positive opening, after oil prices had fallen overnight.

“It feels a bit directionless in the euro market today,” said one. “After that soggy overnight session, it’s not surprising there are no movers.”

Another syndicate official agreed.

“Especially with oil prices down to near historical lows, and negotiations with Iran adding pressure, conditions today are anything but constructive for the credit markets,” he said. “There is a cocktail of factors behind this slowdown in covered bonds, and we need a more constructive backdrop, but this is a slowdown, not a stop.

“There is nothing concrete on the radar screen, but it would be very unusual if in the third week of January we do not have any new issues.”

Syndicate officials said that issuers are eyeing the market, adding that they expected new euro issues to be launched or new mandates announced either tomorrow (Tuesday) or Wednesday, with some suggesting that a German issuer is among the most likely candidates.

“Markets permitting, there will be a few trades,” added another syndicate official, “but the volume will be lower than the last weeks, perhaps significantly lower.”

Syndicate officials noted that issuance might also be more limited this week as some issuers from the Nordics and other jurisdictions are in or entering blackout periods, but said there are still many candidates that could tap the market.

“That will offer the market some relief, but there are sufficient jurisdictions still doing business for us to see more deals this week,” said one.

Some bankers had expected Kookmin Bank to launch the first dollar benchmark covered bond of the year last week, after the Singaporean issuer announced a mandate for a potential 144A issue and held investor meetings in Singapore and Hong Kong on Monday and Tuesday, but a deal did not emerge. A syndicate official at one of leads ANZ, BNP Paribas, Commerzbank and DBS said that a deal had not been targeted last week but may follow subject to market conditions.