Covered bonds have been unperturbed despite Bund yields hitting 18 month highs yesterday (Thursday), with deals performing after rises in yields enabled ABN Amro and Crédit Agricole to print convincing deals this week. However, bankers doubt there is much pre-summer life left in the market.

The sustained rise in yields began last week and this week pushed the 10 year Bund yield above the 0.50% mark for the first time since January 2016. The 10 year Bund today traded between 0.56% and 0.58%.

The sell-off in government bonds, fuelled by ECB minutes that revealed the central bank could review its APP buying, spread into equities. Secondary credit markets were stable, however, with this week’s benchmark covered bond issues continuing to perform.

“Some markets have felt the pain, but in the covered bond market the only impact so far is this long end opportunity presented by the new higher, or less low, yield environment,” said a syndicate banker. “Demand has remained strong through the volatility and the rising rates, especially for the deals that have offered attractive yield.”

On Wednesday, ABN Amro tapped by Eu1.25bn a Eu1bn January 2037 covered bond on the back of around Eu1.65bn of orders, while on Monday a Eu500m 10 year obligations foncières for Crédit Agricole was over twice subscribed. Both were seen trading around 2bp inside re-offer this morning.

A CaixaBank 15 year cédulas was seen on screens this morning, but the trade turned out to have been a private placement.

The preference for duration has been reflected in other markets, with a $1.5bn 30 year senior unsecured bond for Commonwealth Bank of Australia and a 10 year for Italian corporate Atlantia also deemed strong successes yesterday (Thursday).

Bankers said next week could provide further good opportunities to tap the long end, but were unconvinced whether any issuers will come forward to take them, with many banks entering blackout periods and the summer break approaching.

“I struggle to think of many candidates who could come to the market next week,” said one. “Certainly, there are no strategic trades in the pipeline, and the only deals that are likely to come forward will be of the opportunistic type.”