Bankers expect the covered bond market to be open for business next week after the surprise victory of Donald Trump in the US presidential election had a negligible impact on the “resilient” asset class and also a less dramatic effect on wider financial markets than had been anticipated.

Market participants had widely expected a win for Democrat candidate Hillary Clinton, so US stock futures initially fell yesterday (Tuesday) as results began to point towards a victory for her Republican rival. In Europe, the Bund future opened more than one point higher this (Wednesday) morning at 162.8, on the back of the safe haven bid, but fell back to around yesterday’s close as the morning progressed. European stock markets were also down at the open, with the Euro Stoxx 50 down 4%, for example, but some of the losses were retraced through the day, and the falls were less substantial than those in Asia, while US markets soon rose after opening today as The CBR was going to press.

Bankers said Trump’s victory speech helped calm the markets this morning, as the president elect struck a conciliatory tone.

Covered bond spreads were unmoved by the election outcome, and bankers said the market had been largely unaffected.

“The surprise result has been taken surprisingly well,” said a syndicate banker. “People anticipated a more dramatic impact, but from where we are sitting it is a bit like nothing happened.

“It is something of a non-event for our market, which has proved resilient to such things before.”

The election result has been compared to the outcome of the UK’s Brexit referendum in June, but market participants noted that European markets and spreads were substantially calmer this time around.

“The covered bond markets opened sooner than expected after Brexit, with the first sterling deal coming just a week after the vote and euros back the week after,” added a syndicate banker. “That event was more relevant to covered bonds, and I think the market will more or less take this in its stride.”

Bankers nonetheless said that issuers will probably wait until next week to enter the covered bond market, with a Eu500m 10 year Pfandbrief for ING-DiBa yesterday (Tuesday) morning expected to be the only benchmark deal of the week.

“Choosing that pre-election window yesterday now looks very wise,” said a banker close to that deal. “I was not hoping for proof that we made the right decision, but this is proof we made the right decision.”

Another banker agreed.

“I think we are now done for the week – not because a deal would be impossible; just because there is no need to rush and because no-one is ready to do so anyway,” he said. “From a fundamental point of view, this market could support a low beta trade.”

Bankers noted that three euro benchmark covered bonds are in the pipeline for execution next week, with Caja Rural de Navarra, Nordea Mortgage Bank, and ANZ all on the road until Friday ahead of potential deals.

“Of course, we will have further discussions and see where we stand,” said a syndicate banker on one of the mandates, “but in my mind, those deals are still good to go next week.”

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