Issuance next week is expected to be frontloaded because of a confluence of events on Wednesday including the Dutch election and a Fed meeting. A steepening of the curve prompted by less dovish ECB comments yesterday (Thursday) may meanwhile increase interest in longer dated covered bonds.

“Next week is looking like a pivotal week,” said a syndicate banker. “The ides of March are combining with the Dutch elections, the Fed meeting, a Congress decision due on the US debt ceiling, and the UK government potential triggering Article 50.

“There probably will be a busy start to the week in terms of euros financials, but I think it will tail off pretty quickly thereafter. Whether that issuance will be in covereds or in other asset classes remains to be seen.”

The Dutch general election will be held on Wednesday, and bankers said any covered bond issuance will likely be frontloaded into the first two days of the week, given the potential for subsequent uncertainty to close the market. They added that market conditions could also be affected by any permutations that come from televised debates between the candidates on Monday and Tuesday.

US non-farm payroll figures released today (Friday) have meanwhile been seen as clearing the way for an expected rate hike by the Federal Reserve on Wednesday.

“There are many storylines to keep track of, which could make issuance challenging later in the week,” said another banker. “I’d advise any issuer to go sooner rather than later.”

Oversea-Chinese Banking Corporation (OCBC) should be set to issue a debut benchmark covered bond next week, following a series of European investor meetings and calls that began on Thursday of last week (2 March). The Singaporean issuer on 24 February announced the roadshow, with an inaugural euro or US dollar-denominated, medium term maturity covered bond possibly following.

After a meeting of its governing council, the ECB yesterday kept its monetary policy rates and QE programme parameters unchanged and made no official change to its forward guidance, as had been expected.

However, ECB president Mario Draghi said risks to its euro area growth outlook are now “less pronounced” and that, compared to the language used in the ECB’s previous introductory statement in January, there is “no longer that sense of urgency in taking further actions”.

Draghi also confirmed that the ECB will not launch another series of TLTROs, after the current series expires.

These comments were seen as foreshadowing a change in the ECB’s forward guidance, which some analysts expect as soon as June, and signalling the start of a gradual exit from QE. This lead to a repricing of rates, with the 10 year Bund yield yesterday afternoon rising by 6bp to close at 43bp, its highest level in more than a month, and fluctuating around that level today. The German curve subsequently steepened, with the shorter end supported by heavier Bundesbank buying under ECB QE.

Covered bond spreads were unmoved, but bankers said that if yields remain at such levels, real money investors could become more interested in longer maturities in the covered bond market. Most recent euro issuance has been focussed in the intermediate maturities.

“If it holds, I wouldn’t be surprised to see more accounts looking at longer dated paper,” said one. “Mid-term maturities have been the name of the game for some time now, so maybe some accounts would welcome a change if they can get more attractive yields.

“There may be an opportunity there.”

However, they said that interest may be more limited on the issuer side.

“Do I think it’s now easier to print a 10, 12, or 15 year covered bond than it was last week? Definitely yes,” said a syndicate banker. “But are there many issuers that want to do so next week, who haven’t already? Probably not.”

Besides OCBC, PKO Bank Hipoteczny and Hypo Noe are also in the pipeline with potential euro benchmarks, but will not go on the road until next week, with their deals expected later.

Bankers said other issuers are monitoring the market, and some noted that Canadian banks in particular could be candidates for issuance next week, given that the Canadian reporting season recently ended.