Market participants’ attention is turning to the New Year as the covered bond market heads into the last week of 2016 deemed viable for issuance, and with a Eu500m issue for Coventry Building Society – the only deal in the public pipeline – now potentially a project for next year.

The euro covered bond market typically closes in the second week of December – the final euro benchmark issue of last year came on 9 December – and bankers said that, given a Wednesday FOMC meeting, tomorrow (Tuesday) and Wednesday constitute probably the last available window.

“I certainly don’t discount this week as an issuance window, but there’s not long left,” said one.

Coventry Building Society is the only issuer with a publicly mandated deal in the pipeline, having completed a European roadshow on 30 November ahead of a potential Eu500m seven year issue.

“There is no official announcement, so it is fair to assume they are still in a monitoring position,” said a syndicate banker at one of leads Commerzbank, Danske, HSBC and Natixis. “But as time goes by, obviously there is the potential that this could be a project for next year.”

Bankers away from the deal were divided over whether Coventry Building Society, and any other issuers, would be better served entering the market this week or waiting until next year.

“I would have thought that last week was the best window for them, with the ECB announcements on Thursday having no negative impact and with the markets being quite calm after the Italian referendum,” said one.

“The evolution of spreads that took place while they were on the road might be keeping them on the sidelines, but that said, I don’t know if the best approach would be to wait until the New Year. We expect there to be heavy supply right from the start in January, meaning issuers have to pay larger premiums and push spreads wider still.”

Markets are expected to be open from 3 January, a Tuesday, giving issuers almost a full week for issuance. This year the covered bond market reopened on Tuesday, 5 January, when three euro benchmarks and one sterling benchmark kicked off a week in which Eu8.5bn of new euro benchmarks were sold.

The start of 2017 could be similarly active, bankers said, noting that fewer issuers have launched pre-funding exercises this December than in previous years.

“It feels like many issuers are looking at the calendar and seeing a lot of potential political risk next year, and are therefore mindful of using any good window available to them, including the first few days of January,” added a syndicate banker.

Bankers debated whether the start or end of January represents the better window.

“There is no easy option,” said a syndicate banker. “Do you go out in the first round and take part in that tricky price discovery, or do you go later, when the weight of supply might have sent everything wider?

“It feels like many issuers have recently embraced a philosophy of using the market you have, rather than waiting for a better market that you may or may not have later on, so that would suggest a busy start.”

Another banker said that entering the market early might be the most prudent choice for issuers. He said one of the key differences between market dynamics today and market dynamics in January will be that SSA issuers will be back in the market next year, having been quiet in the final quarter of 2016.

“Their absence means covered bond spreads, like other triple-A assets, have been quite well technically underpinned,” he said. “As those SSA issuers emerge in January with significant funding programmes starting from zero, the dynamic of the covered bond market may adjust a bit.

“Bearing that in mind, and given that investor appetite for covered bonds may wane a bit if they have other triple-A assets available, it might make sense to go sooner rather than later. I would suggest to issuers that they take the opportunity to print some form of transaction before they go into their blackout periods, which for many are in the second half of January.”

Other bankers said, however, that there is no uniform approach that would be appropriate for all names from all jurisdictions.

“It depends on the issuer,” said one. “Obviously some would benefit from having another trade to reference when pricing their deal – for example, it would be better if DNB Boligkreditt pushes ahead first before one of the smaller Norwegian names, who would have to pay a bigger premium.”

He argued that supply in January may not necessarily be as heavy as in previous years – given that many market participants expect lower overall supply next year – meaning spreads may not necessarily widen.

“Some issuers may not use the covered bond market as their first point of engagement, instead preferring senior,” he said. “As the overall covered bond supply outlook for next year is lower than this year, I think covered bond spreads are fairly well anchored where they are.

“Therefore I don’t think there is necessarily a need to rush, and I believe the most important thing is the issuer’s timing requirements in terms of both silent periods and other trades in other asset classes that they may want to consider.”