Covered bond issuance is expected to restart next week, but with the market caught between holidays, blackouts and political risks, volumes could remain unconvincing despite highly supportive conditions. Kookmin is a candidate to end the drought, with an awaited US dollar issue.

The last, and only, new euro benchmark covered bond issuance this month came on Monday of last week (3 April), when Commonwealth Bank of Australia and Yorkshire Building Society sold Eu750m seven year and Eu500m six year deals, respectively. In US dollars, SR-Boligkreditt sold the last benchmark, a $600m five year on Wednesday of last week.

“Covered bonds have been notable only in their absence this week,” said a syndicate banker. “With a lot of people deciding to stay quiet through the holiday period and some investors operating only with skeleton desks, it’s not surprising that the primary market has been dead and that there’s been barely any turnover on the secondary market.

“But it’s not been quiet for the want of better conditions. SSAs have been pretty busy, and banks did come to the market in the window at the start of the week, but they saw this as a week to issue in senior.”

Bankers said the strength of primary markets – in spite of a softer tone in wider markets on the back of geopolitical concerns – was demonstrated by the week’s euro-denominated senior issuance. On Monday, Intesa Sanpaolo attracted over Eu2.7bn of orders to a Eu1.5bn five year senior bond, while on the same day Nationwide Building Society attracted over Eu1.2bn of orders to a Eu750m six year. On Tuesday, Credit Agricole sold a Eu1bn five year senior non-preferred FRN, taking around Eu2bn of orders.

It is expected that conditions will still be conducive when the market reopens on Tuesday, with jurisdictions across Europe closed for Easter Monday. Bankers noted that technicals are especially supportive in the covered bond market as some Eu19bn of benchmark covered bonds mature this month, versus the Eu1.25bn of new benchmark supply so far.

Some benchmark issuance is expected, but bankers are nonetheless hesitant to forecast substantial flow of supply after the four day break.

“We are somewhat in a strange Neverland,” said one. “There are the Easter holidays, some issuers are already in blackout and some will soon be going into blackout – there are good arguments for many regions not to do anything.

“There is at least some potential activity for next week, but none are yet at the stage of going live on Tuesday. I doubt that next week will be as quiet as this week, but that is not saying much.”

Next week will be the last window ahead of the first round of French presidential election on Sunday, 23 April, and bankers said some issuers could look to get planned deals cleared before the vote, given the potential for subsequent market volatility. However, they noted most issuers are well-funded – in particular Eurozone banks, after the recent TLTROs – and said issuers may instead wait until later in the year to return to the market.

In the US dollar market, a 144A/Reg S covered bond issue is awaited from Kookmin Bank. The South Korean issuer announced a mandate last month for a potential deal with a short to intermediate maturity, following a roadshow visiting Hong Kong, Europe and the US.

A syndicate banker at one of leads BNP Paribas, Citi, Commerzbank, ING, Nomura, OCBC and SG said the issuer has been on the road in the US this week, and said the deal “could be a candidate” for execution next week.