Australian banks are set to follow up their latest results by visiting the European markets next week, with at least one euro benchmark covered bond expected. However, bankers said other issuers could focus on higher beta markets even if this week’s supply was encouraging.

Only two Australian euro-denominated benchmarks have been launched this year: Commonwealth Bank of Australia (CBA) sold a dual tranche issue on 27 January, comprising a Eu500m (A$768m) 2031 tranche and a Eu750m 2021 tranche, while Macquarie Bank sold a debut, Eu500m five year issue on 18 February. National Australia Bank (NAB) and Westpac sold $1.4bn (Eu1.22bn, A$1.87bn) and $1.35bn five year deals in February and March, respectively, while ANZ issued a £500m (Eu631m, A$967m) three year FRN in February.

While overall covered bond issuance was modest this week, amid public holidays across Europe, syndicate officials said new supply is likely next week, and Australian issuers are among those expected to launch new issues.

“There is clearly something in the pipeline from Australian banks,” said one. “I would be very surprised to not see anyone from Australia coming next week, in either senior or in covered.”

Most leading Australian issuers are exiting blackout periods this week, with Westpac having announced its half year results on Monday, ANZ on Tuesday, NAB today (Thursday), and Macquarie tomorrow.

“There are a couple talking to investors,” said another banker. “The Aussies do investor work in Europe after announcing their results every year – but you can still read something into it.

“These issuers are always looking. It could be senior, it could be covered.”

Syndicate officials also noted that Australian euro-denominated supply has been limited, and that spreads have tightened substantially since the most recent benchmark issues.

“There is reason to speculate,” said one. “The Australian issuers will be well positioned to do a deal having come out of blackout, and they have been quite quiet so far this year.”

CBA’s February 2021 tranche was launched at 33bp over mid-swaps and was today seen at 12bp, bid, and the February 2031 tranche has tightened from 50bp over to 34bp, while Macquarie’s March 2021s were seen at around 25bp after having been launched at 40bp over.

Following the publication of their results this week, Westpac and ANZ published supplementary prospectuses in relation to their covered bond programmes.

The primary market was quiet today, with Germany and other European jurisdictions marking Ascension Day, and bankers said the window for issuance this week has likely closed, with many market participants expected to take a long weekend including tomorrow (Friday).

Bankers said that issuance conditions nevertheless remained highly supportive for covered bonds, after euro benchmarks from LBBW and OP Mortgage Bank on Tuesday were more than twice oversubscribed despite being seen as offering little to no new issue premium.

However, bankers suggested issuers’ focus could be on the subordinated market unless a weakening of market sentiment continues into next week.

“People are focussed on the subordinated market still, because there is a lot of potential risk ahead of us in June,” said a syndicate official. “So you will see in the next weeks more supply in non-secured formats – unless the market continues to deteriorate.

“If there is anything in covered next week, and I believe there will be, it will potentially be Australian.”