Covered bond issuance could continue through to the end of July, according to bankers, with “phenomenal” liquidity and highly supportive fundamentals making a compelling case for issuers to follow this week’s encouraging results, even as the summer holiday period takes effect.

Some Eu2.5bn of new euro benchmark covered bonds were sold this week, a Eu1.25bn six year for Canadian Imperial Bank of Commerce on Monday and a Eu1.25bn 10 year for Commonwealth Bank of Australia on Wednesday. Westfälische Landschaft Bodenkreditbank also tapped a February 2026 issue by Eu250m on Tuesday, before HSH Nordbank increased an April 2023 issue by Eu350m on Wednesday, taking the number of German issuers to have tapped outstanding Pfandbriefe this month to five.

Bankers said the depth of demand for the two non-CBPP3 eligible benchmarks in particular showed the strength of the market, in spite of earlier concerns that issuance might dry up completely during the summer months in the wake of the UK’s vote on 23 June to leave the EU.

“It’s just a month ago that we were all doom and gloom and expecting a very quiet couple of months after the referendum,” said a banker. “But the market has well and truly shaken it off, and those two deals show that there’s real strength in covereds right now.”

Each of the two Eu1.25bn covered bonds attracted over Eu2.5bn of demand, with CIBC’s six year issue gaining strong momentum in spite of being the first non-Eurozone benchmark to offer a negative yield, while CBA’s 10 year is the joint-largest euro covered bond for an Australian issuer since 2012.

Bankers noted that CIBC’s deal was trading 2bp inside re-offer today (Friday), while CBA’s was seen 5bp inside.

“Both of these jurisdictions have, at times, had challenging receptions in the euro covered market,” said a syndicate official. “But to get Eu2.5bn books for these non-Eurozone issuers harks back to the start of the year, when we saw strong Nordic names getting over Eu2bn of demand, and it shows how far the market has come.

Bankers said the driving factors behind the success of this week’s deals were a recent lack of benchmark covered bond supply and a build-up of demand, and the pick-up on offer versus even tighter sovereign bonds.

Another syndicate official said this was also demonstrated by a £1bn (Eu1.2bn) nine year senior unsecured issue for Wells Fargo that attracted £3.25bn of orders on Tuesday, and was the first sterling denominated senior issue since the Brexit vote.

“That deal was an absolute blow-out,” he said, “and it shows that whatever the product, the market is very, very friendly right now, and liquidity is phenomenal.

“If you have a deal you want to do, you should do it now, before you head to the beach.”

Bankers said that the market had reacted positively to dovish comments at an ECB press conference by president Mario Draghi yesterday (Thursday) – with senior credit indices tightening 5bp through the afternoon before remaining stable today – and said conditions will likely remain supportive next week.

“There is a question mark over how much longer we can keep going as the holidays kick in, and quite a few places are running with skeleton desks now,” said a syndicate official. “But looking at how busy July was last year, I think we’ll continue to see execution through to the end of the month.”

Some Eu17.75bn of euro benchmark covered bonds were sold last July, with issuance continuing to the last week of the month, while benchmark supply so far this July totals Eu3.75bn.

“There’s no reason to think we can’t keep going, in my view,” added the syndicate official. “Fundamentally it’s just impossible to argue against this market.

“Conditions are, if not best we’ve had all year, then the best we’ve had for some time.”

Another banker agreed.

“The only check on issuance, besides the holidays, is that most issuers are already ahead of their funding plans,” he said. “In light of that, there won’t be a flood of deals, but I certainly expect more.”