Markets reacted in an orderly manner to Italy’s vote against constitutional reform yesterday (Sunday), with covered bond spreads stable today, but even an anticipated extension of QE by the ECB on Thursday is expected to provide little succour to the primary market.

After an initial fall in the euro and Italian shares at the open, the market quickly recovered, with the currency later hitting a two-week high. Italian government bond yields rose around 15bp, but this was not as substantial as moves last week and some losses were retraced.

Italian covered bond spreads were mostly stable, with only slight widening in certain names. Monte dei Paschi di Siena, which has been most vulnerable to bad Italian news, was said to be around 5bp wider.

“I think the market reaction can be best characterised as being quite orderly,” said a banker. “Covered bond spreads had widened quite a bit already over the last few weeks, and today they were pretty much unmoved, so it seems this result was already priced in.”

The calm reaction was attributed to a combination of factors: markets having been positioned for a “no” vote; the swift announcement of prime minister Matteo Renzi’s resignation, which removed the potential for prolonged uncertainty about his future; and the expectation of further support from the European Central Bank.

Despite the measured market reaction, bankers said the potential for renewed volatility could result in a risk-off sentiment taking hold for the next few days, keeping issuers on the sidelines.

Coventry Building Society is said to be monitoring the market, having completed a European roadshow on Wednesday ahead of a potential Eu500m seven year issue. Bankers said a Nordic issuer is also monitoring the market having first informed potential leads of its interest in printing a benchmark covered bond two weeks ago, but were uncertain whether the issuer will press ahead.

Bankers awaiting the deals are now eyeing a meeting of the ECB governing council on Thursday, which they said could put the market on a surer footing.

“Although the news has been taken well, the ‘no’ vote does mean the market is less supportive than it perhaps could have been,” said another banker. “In that context, Thursday’s ECB meeting has an extra edge.”

Most market participants expect ECB president Mario Draghi to announce an extension of the asset purchase programme (APP) from its current earliest end-date of March 2017 by a minimum of six months.

However, there is little consensus over whether the ECB will also announce a lowering of its monthly target of Eu80bn and whether the Eurosystem will begin to taper its purchases. Some expect the ECB to adjust some of the technical parameters of its purchase programmes to widen the scope of the paper it can buy, but others said this might not be necessary, as the recent back-up in yields has allowed central banks to buy at the shorter end of the curve once again.

If the ECB somehow disappoints, syndicate bankers said the door will almost certainly be closed for euro issuance this year. However, they said that even the expected QE extension would be unlikely to spur any substantial volumes of issuance.

“I’ve heard some people still suggesting that a strong ECB could mean there’s a new window, and there may be a slim opening, but if you look back at previous years then the market is usually done by the time we get to around 9 December,” said a syndicate banker. “I think it’ll be too little, too late.

“As with previous weeks, there’s also questions around market depth versus valuations. So you may get one or two issuers – potentially Coventry – doing a small, last minute transaction, but in terms of larger, pre-funding exercises, I don’t think anyone will be keen to go out this year.”

Another banker agreed.

“It remains to be seen how dedicated Coventry and that Nordic name are to these projects,” said a syndicate banker. “For Coventry it might make sense to make use of the roadshow that they have already embarked on, but for others I don’t now see a compelling reason for forcing a deal through in December.

“If they are going to go, it would probably be best to take an opportunity as soon as it arises, rather than wait for any good news from the ECB. But they would have to pay up to do so.”