Constructive conditions this week that enabled a range of supply – including a first zero coupon Pfandbrief, a potentially tricky Austrian issue and a Macquarie debut – are expected to continue in spite of a softer session yesterday (Thursday) afternoon.

Eight euro benchmarks totalling Eu5.5bn were launched this week in a period of stability, as volatility that kept the market closed for most of last week receded and issuance also picked up in the senior space. Yesterday afternoon equites fell and credit indices widened slightly, and a DNB senior deal the only financial institutions issuance this (Friday) morning, but syndicate officials are confident that conditions will be supportive next week.

“Things do feel a bit softer than they have most of the week, with credit indices a few basis points wider after that reversal yesterday afternoon,” said one. “But in terms of market sentiment, there’s no material change.

“Things are calm, and it’s a nice way to end the week. All’s rosy in the garden.”

Another syndicate official agreed.

“Yes there was a bit of dip yesterday, but today things feel stable,” he said. “It’s encouraging that we’ve had the first sign of a slowdown in this rally and it hasn’t turned into a sell-off.”

Syndicate officials noted that Hamburger Sparkasse will complete a roadshow on Monday ahead of a potential euro benchmark issue, while Deutsche Apotheker- und Ärztebank is also marketing a potential deal, and added that other issuers are monitoring the market.

“There are issuers that are keen to get an insight on the market today,” said one, “and the feeling is that next week will also be constructive.”

Syndicate officials noted that this week’s supply has been driven by German issuers, which contributed five deals comprising Eu3.25bn of the week’s total, but they said it was particularly encouraging that a Eu500m six year issue for Bawag on Tuesday and a Eu500m five year debut for Macquarie yesterday (Thursday) had received strong demand.

“There has been a lot of quality, low beta names this week, with supply led by the Germans, which tend to do well anyway,” said one. “But we’ve seen a strong deal from Austria and a very good debut from Australia, which are not necessarily the easiest to sell.

“The main takeaway from these deals is, I think, simply that the mood now is much brighter than it was eight days ago.”

Syndicate officials added that most of the week’s deals have performed well, either trading tighter or around re-offer.

The first benchmark covered bond to be priced with a 0% coupon also hit the market this week, as Helaba sold a Eu1.25bn long four year mortgage Pfandbrief on Tuesday, offering a yield of 0.025%.

Syndicate officials said they expect more 0% coupon issues to follow in the coming months, adding that negative yielding Pfandbriefe cannot be ruled out.

“That’s the way the market is going, and it may be something that investors have to get used to,” said one. “I think the overall compensation on these bonds would not be enough for asset managers, but you can target bank treasuries.

“Such a deal still offers a pick-up versus the deposit rate, which is in the minus.”

Another syndicate official agreed, noting that Helaba’s issue attracted orders approaching Eu2bn.

“Clearly the coupon didn’t stop many people from buying,” he said.