The covered bond market is expected to close by Wednesday, as bankers see a small chance of opportunistic supply tomorrow ahead of central bank meetings and as preparations for 2018 are underway. January is forecast to bring a typical supply rush, potentially with different flavours.

Just one euro benchmark covered bond has been brought to market this month, a Eu750m long eight year OBG for Crédit Agricole Cariparma last Monday. After an awaited sub-benchmark issue for Oma Savings Bank was also launched last Monday, the pipeline is now cleared of publicly announced deals, and syndicate bankers said the market has likely received its last trades of the year.

“If there are any deals still to come they will be very opportunistic trades or taps, perhaps based on reverse enquires and specific needs accounts must fill before they close their books,” said one.

In December 2016 the last euro benchmark covered bond of the year came on 7 December, a Eu1bn five year for Deutsche Bank SAE that was the only deal of the month. December 2015 was more active, with Eu4.25bn issued across four benchmark deals, but the market closed after 9 December.

The Fed is widely expected to hike rates after an FOMC meeting on Wednesday, and though ECB and Bank of England meetings are not expected to bring significant market-moving announcements or changes in policy, bankers said that market participants may treat the events as a cut off point, implying that any last minute supply is likely to come tomorrow (Tuesday).

“There’s probably a small chance of seeing a deal tomorrow, but I’m not sure who that would be,” said one. “Most issuers are now focussing on preparing for 2018, so I think we’re done.”

This year the euro market opened on 3 January, a Tuesday, with four issuers printing a combined Eu4bn on the first day of primary market activity. Bankers expect the market to again reopen on 3 January, a Wednesday.

“I would expect to see some mandate announcements on 2 January, the first day back, for execution the next day,” said one.

Euro benchmark supply totalled Eu26bn in January – the busiest month of 2017. The coming January is again forecast to be busy, even though some analysts and market participants expect euro benchmark issuance over the whole of 2018 to be lower than the Eu111bn sold so far this year.

“I think we’ll have heightened supply, as usual, but I think next year issuer behaviour will be different, in terms of geographic thinking,” added a syndicate banker. “I think for example we’ll see UK issuers back in the euro market in the first couple of weeks, as they will almost universally expect to be issuing more covered bonds in 2018 than 2017 following the end of the BoE’s term funding scheme.

“If you’re a UK bank with plans to issue in euros in 2018, you’d probably be minded to do that sooner rather than later, given that European investor attitude towards Brexit may get worse as you get further into the year. Meanwhile, you may save any sterling trades for rainier days.”

This year, UK issuers sold Eu4.75bn of euro-denominated benchmark covered bonds.

The syndicate banker suggested that Nordic banks may also feature prominently in the January market, given the attractiveness of prevailing spread levels.

“They will be looking at the market, seeing deals trading in the context of minus 10bp, thinking that these are incredibly tight funding levels for these kinds of issuers,” he said. “They will be asking themselves if things will get any better than that in 2018, and you’d have to say probably not, in the context of the unwind of QE.”

The last two months of this year have featured a late flourish of sterling issuance, with £2.6bn (Eu2.96bn) issued across five deals, including domestic issuers – Santander UK and TSB Bank – and international issuers – SpareBank 1 Boligkreditt, Deutsche Pfandbriefbank and RBC.

Bankers said other international issuers still had potential sterling trades in their plans, but these are expected to be launched next year.

“There were a couple of international issuers that were monitoring the sterling market quite closely, but for a variety of reasons they didn’t come this year,” said a syndicate banker. “However, I see no reason that they wouldn’t try to print those transactions in the first week of January.”